Chapter Objectives

Understand that duration is a better measure of the life of a bond than maturity.
Be able to use present value techniques to compute duration.
Explain the effect that duration has on bond price sensitivity to interest rates changes.
Describe the uses of duration in protecting the value of a portfolio.
Relate zero-coupon bonds to the concept of duration.
Explain how the reinvestment rate for inflows may materially affect the final value of an investment.

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