Page 126 - AFM Integrated Workbook STUDENT S18-J19

Chapter 6

3.4 Bond duration

 In Chapter 2, we saw how to calculate the duration of an
investment project. The same methods can also be used to
calculate the duration of a bond.

 When calculating bond duration, the yield (k d) is used as the
discount rate.

 The bigger the duration, the greater the risk associated with the
bond.

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