| The weighted average of the maturity of all the income streams, including capital repayment, from a bond or portfolio of bonds, stated in years. Duration also indicates the change in the value of a security that will result from a 1% change in interest rates. For example, a 5 year duration means the bond will decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%. Unlike maturity, duration takes into account interest payments that occur throughout the course of holding the bond. Duration is used by investors to measure the volatility of a bond. The higher the duration, the longer an investor needs to wait for the bulk of the payments, and the more its price will drop as interest rates rise.
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