Modified Duration Calculator

What is Modified Duration?

Modified duration adjusts Macaulay duration for the level of yield to produce a direct measure of interest rate sensitivity. A modified duration of 4 means the bond's price will change by approximately 4% for every 1 percentage-point change in yield — rising when yields fall and falling when yields rise. Modified duration is a linear approximation; for large yield changes, convexity must be added for accuracy. Because it depends on both the cash flow timing (Macaulay duration) and the discount rate, modified duration decreases as yields rise and increases as maturity lengthens.