Economics Bonds Questions
Bond duration is a measure of the sensitivity of a bond's price to changes in interest rates. It represents the weighted average time it takes for an investor to receive the bond's cash flows, including both coupon payments and the return of principal. A higher duration indicates a greater price sensitivity to interest rate changes, while a lower duration suggests less sensitivity. Duration helps investors assess the risk and potential volatility of a bond investment, allowing them to make informed decisions based on their investment objectives and market conditions.