How to Calculate the Interest-Rate Sensitivity on Bonds

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How to Calculate the Interest-Rate Sensitivity on Bonds – This is a place for the community to provide tips and advice on How to Calculate the Interest-Rate Sensitivity on Bonds. This topic was created by yuki kidokoro and the tips are provided by the community. The tips you add here can be your own or referred from another site. The best tips are then ranked at the top when up-voted by members of the community.

Tip 1 - Measuring a Bond's Interest-Rate Sensitivity

Published: 9 years, 6 month(s) ago | Submitted by Paul Hoop | permalink

Duration, effective duration and average life are three ways to measure a bond's interest rate sensitivity.

For further reading: http://www.thestreet.com/story/866658/1/measuring-a-bonds-interest-rate-sensitivity.html ^[1]

Tip 2 - Interest Rate Sensitivity Definition | Investopedia

Published: 9 years, 6 month(s) ago | Submitted by David Brudenell | permalink

A measure of how much the price of a fixed-income asset will fluctuate as a result of changes in the interest rate environment. Securities that are more sensitive will have greater price fluctuations than those with less sensitivity. This type of sensitivity must be taken into account when selecting a bond or other fixed-income instrument that the investor may sell in the secondary market.
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For further reading: http://www.investopedia.com/terms/i/interest-rate-sensitivity.asp ^[2]

Tip 3 - How Do I Calculate Interest Rate Sensitivity on Bonds? | eHow

Published: 9 years, 6 month(s) ago | Submitted by Hearty | permalink

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...

For further reading: http://www.ehow.com/how_4963434_calculate-interestrate-sensitivity-bonds.html ^[3]