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AcadiFi
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weekend_warrior2026-05-21
cfaLevel IFixed IncomeBond Valuation

Should I use my calculator to understand duration or just memorize the formula?

I can calculate a bond price on my calculator, but duration still feels abstract. Is repricing at two yields a good way to check whether modified duration makes sense?

51 upvotes
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AcadiFi Certified Professional

Repricing can be a very good check, but it should support the concept instead of replacing it.

Suppose Harbor Foods has a bond priced at 102.40 with modified duration of 4.75. If yields rise by 0.20 percentage points, duration estimates:

-4.75 x 0.0020 = -0.0095 = -0.95%

Estimated new price:

102.40 x 0.9905 = 101.43

If you reprice the bond at the higher yield and get a price near 101.43, the calculator check supports the duration estimate. If the yield change is large, convexity may explain a wider difference.

The workflow is:

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Do not jump straight to keys. First identify whether the question asks for Macaulay duration, modified duration, or effective duration.

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