Bond Duration Calculator

Bond duration measures price sensitivity to interest rate changes. Macaulay duration: weighted average time to receive cash flows in years. Modified duration: percentage price change per 1% yield change. 10-year bond with 5% coupon and 5% yield (semi-annual): ~7.99-year Macaulay duration, ~7.79 modified duration. Means a 1% rate rise corresponds to roughly a 7.79% price drop.

Example: 10-year bond, 5% coupon, 5% market yield, semi-annual payments. Macaulay duration ≈ 7.99 years (weighted average time to cash flow receipt). Modified duration ≈ 7.79. If yields rise from 5% to 6%: bond price falls roughly 7.79%. Duration captures interest rate risk - the longer the duration, the more rate-sensitive.

Duration drivers: (1) Time to maturity (longer = higher duration). (2) Coupon rate (lower coupon = higher duration). (3) Yield level (lower yield = higher duration). Zero-coupon bonds have duration = maturity (no interim cash flows). Heavily coupon-paying bonds have shorter effective duration. Duration matching: match portfolio duration to investment horizon to immunise against rate changes. Pension funds, insurance companies use duration matching extensively.

Quick example

With annual coupon rate of 5% and market yield of 5% (plus years to maturity of 10 years and payments per year of 2), the result is 7.99 years. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Annual Coupon Rate %, Market Yield %, Years to Maturity, and Payments per Year. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.

What's happening under the hood

Macaulay = weighted average time to cash flows. Modified = Macaulay / (1 + periodic yield). The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

Where this fits in planning

This is a "what-if" tool, not a forecast. It helps to test ideas: what happens to the result as the Annual Coupon Rate % or the Market Yield % changes. The value is in the scenarios you run, not the single answer you get from the defaults.

What this doesn't capture

This is a simplified model that holds its assumptions constant. Real outcomes vary with market conditions, costs, taxes, and timing, so the figure is best read as one scenario rather than a forecast.