A measure of how sensitive a bond's price is to changes in interest rates, expressed in years. It tells you approximately how much a bond's price will change if interest rates rise or fall by one percentage point. Bonds with longer durations are more affected by interest rate changes.
A bond with a duration of 5 years will lose about 5% of its value if interest rates rise by 1%. Conversely, if interest rates fall by 1%, the bond's value will gain about 5%. A bond with a duration of 10 years would have roughly twice that sensitivity to rate changes.
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