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What is Bond Duration and Why is it Important?

What is Bond Duration and Why is it Important?

The higher the bond’s duration, the more its price will fall as interest rates rise. If interest rates are expected to fall during the time the bond is held, a longer duration bond would be appealing because its price would increase more than comparable bonds with shorter durations. As a general rule (with equal credit quality) the shorter the bond’s duration, the less volatile it will be.

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