What Bond Liability Means For Your Retirement Plan
Bond prices are sensitive to interest rate changes, and bond duration is a measure of just how sensitive.
For instance, if a increase in interest rates from 2% to 3% caused a bond’s price to fall by 8.5%, the bond would have a duration of 8.5, meaning that a 1% rise in interest rates leads to an 8.5% drop in price.
Pfau, Wade D. PhD, "What Bond Liability Means For Your Retirement Plan" (2017). Faculty Publications. 706.