You may have even heard the phrase, “If interest rates rise, bond prices will drop.” Bonds are sensitive to interest rate risk, which means that when interest rates rise, the value of bonds ...

Meanwhile, the yield of a perpetual bond is determined using the following formula: Yield = Annual Coupon Payment / Current Market Price of the Bond This calculation provides the current yield ...

Modified duration is a formula that measures the sensitivity ... Conversely, if interest rates decrease by 1%, the price of the bond will increase by 2.67%. Modified duration is important to ...