Checkbox

Correct! Keep It Up!

Duration — bond price sensitivity to rate moves. Duration (commonly modified duration) approximates how much a bond’s price will change for a 1 percentage-point change in yield: %Δprice ≈ −(duration) × Δyield. It reflects both the timing and size of cash flows: longer maturities and lower coupon bonds generally have higher durations and therefore greater sensitivity to interest-rate changes. Duration is a central metric for fixed-income investors because it translates interest-rate risk into a single, intuitive number that can be aggregated across bonds and funds.

Using duration in portfolio construction and hedging. Manage interest-rate exposure by targeting portfolio duration that matches your risk tolerance or liability horizon (duration matching). Investors can reduce duration by buying shorter-term bonds, increasing coupon exposure, or using floating-rate notes. Bond ladders (staggered maturities) reduce reinvestment and interest-rate timing risk. For larger portfolios, duration hedges (interest-rate swaps, futures) can alter sensitivity efficiently, but they add complexity and counterparty considerations. Recall that duration is a linear approximation—during large yield moves, convexity becomes important; higher convexity cushions price declines when rates rise. Combine duration and convexity analysis for realistic scenario planning.

Did You Also Know...

By Quiz Coins

SEP IRAs let small-business owners make sizable employer contributions and are simpler to administer than some alternative plans.

Recent Blog Posts

Our Story To Financial Success

At Wise-Wallet, personal finance is a journey.

Read More
Credit Cards: Match Your Wallet to Your Lifestyle (Travel, Cashback, or Balance Transfer?)

Pick cards to match your life: cashback for simplicity, travel cards for frequent flyers who use perks, and balance-transfer cards to crush debt — then automate, pay in full, and track value.

Read More
How to Build a Bulletproof Emergency Fund (Even if You Hate Budgeting)

Build a simple, automatic emergency fund by choosing a target, automating transfers, and using low-effort saving hacks — no spreadsheets required.

Read More