Modified Duration Calculator
Summary
Measures a bond's price sensitivity to interest rate changes, expressed as the approximate percentage change in price for a 1% move in yield.
Example
A bond with a Modified Duration of 5 will decrease approximately 5% in price for every 1% rise in interest rates — and gain 5% for every 1% fall.
Explanation of Results
Modified Duration is derived from Macaulay Duration — the weighted average time to receive the bond's cash flows. Dividing Macaulay Duration by (1 + yield/periods) gives Modified Duration, which directly approximates price sensitivity. Higher duration means greater interest rate risk.
