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# Modified Duration

A formula that expresses the measurable change in the value of a security in response to a change in interest rates. Calculated as:

Where:
n = number of coupon periods per year
YTM = the bond's yield to maturity

Modified duration follows the concept that interest rates and bond prices move in opposite directions. This formula is used to determine the effect that a 100-basis-point (1%) change in interest rates will have on the price of a bond.

Investment dictionary. . 2012.

### Look at other dictionaries:

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