Bond duration analysis.

Bond duration measures price sensitivity to interest rate changes. Macaulay duration: weighted average time to receive cash flows in years. Modified duration: percentage price change per 1% yield change. 10-year bond with 5% coupon and 5% yield: ~7.7-year Macaulay duration, ~7.4 modified duration. Means 1% rate rise = ~7.4% price drop.

Example: 10-year bond, 5% coupon, 5% market yield, semi-annual payments. Macaulay duration ≈ 7.99 years (weighted average time to cash flow receipt). Modified duration ≈ 7.79. If yields rise from 5% to 6%: bond price falls roughly 7.79%. Duration captures interest rate risk - the longer the duration, the more rate-sensitive.

Duration drivers: (1) Time to maturity (longer = higher duration). (2) Coupon rate (lower coupon = higher duration). (3) Yield level (lower yield = higher duration). Zero-coupon bonds have duration = maturity (no interim cash flows). Heavily coupon-paying bonds have shorter effective duration. Duration matching: match portfolio duration to investment horizon to immunise against rate changes. Pension funds, insurance companies use duration matching extensively.

Quick example

With annual coupon rate of 5% and market yield of 5% (plus years to maturity of 10 years and payments per year of 2), the result is 7.99 years. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Annual Coupon Rate %, Market Yield %, Years to Maturity, and Payments per Year. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

What's happening under the hood

Macaulay = weighted average time to cash flows. Modified = Macaulay / (1 + periodic yield). The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

Where this fits in planning

This is a "what-if" tool, not a forecast. Use it to test ideas before committing: what happens if the rate is 2% lower than hoped, what happens if you add five more years. The value is in the scenarios you run, not the single answer you get from the defaults.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.