Duration

Description br, br, ,Paizul, finance, financepaizulacademy Duration is a measure of the sensitivity of the price (the value of principal) of a fixedincome investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. The duration number is a complicated calculation involving present value, yield, coupon, final maturity and call features. Fortunately for investors, this indicator is a standard data point provided in the presentation of comprehensive bond and bond mutual fund information. The bigger the duration number, the greater the interestrate risk or reward for bond prices. It is a common misconception among nonprofessional investors that bonds and bond funds are risk free. They are not. Investors need to be aware of two main risks that can affect a bond s investment value: credit risk (default) and interest rate risk (rate fluctuations). The duration i