Tip - How Do I Calculate Interest Rate Sensitivity on Bonds? | eHow

Duration measures the interest rate sensitivity of a bond to a 1 percent change in the rate. For example, a $100,000, 10-year bond that pays a 5 percent coupon each year has a duration of 8. If interest rates rise from 5 to 6 percent, the current value of that bond will fall by 8 percent. Calculating duration involves calculating the discounted...