A measure of how sensitive a bond’s price is to changes in interest rates. Generally, the higher the duration, the more a bond’s price will rise or fall when rates move. For example, if a bond has a duration of 6, its price will typically change by about 6% for every 1% change in interest rates. If rates rise from 4% to 5%, the bond’s price would be expected to fall by roughly 6%. If rates fall by 1%, the bond’s price would be expected to rise by about 6%.
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