What does modified duration mean in practice?

A modified duration of 7 means the bond's price falls roughly 7% if yields rise one percentage point, and vice versa. It's the standard first-order measure of interest-rate risk.

Why is duration less than maturity for coupon bonds?

Coupons return money before maturity, pulling the weighted-average wait below the final repayment date. Only zero-coupon bonds have duration equal to maturity.

Bond Duration Calculator

Macaulay and modified duration, priced.

Face value ($)Coupon rate (%/yr)Yield to maturity (%)Years to maturity

Payments per year

Modified duration

7.922

≈ 7.9% price move per 1% yield change

Macaulay

8.081 yrs

Bond price

$1,081.76

Premium / discount

8.18%

The other kind of duration. Enter a bond's face value, coupon rate, yield to maturity, and term: the calculator returns its price, Macaulay duration (the cash-flow-weighted average wait, in years), and modified duration (the % price move per 1% yield change).

How to use it

1.Enter face value, annual coupon rate, and yield to maturity.
2.Set years to maturity and payment frequency.
3.Read the price, Macaulay duration, and modified duration.

Questions people ask

What does modified duration mean in practice?: A modified duration of 7 means the bond's price falls roughly 7% if yields rise one percentage point, and vice versa. It's the standard first-order measure of interest-rate risk.
Why is duration less than maturity for coupon bonds?: Coupons return money before maturity, pulling the weighted-average wait below the final repayment date. Only zero-coupon bonds have duration equal to maturity.

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