Effective Duration Calculator
Enter the bond prices for a yield rise and fall, the current price and the yield change to find effective duration.
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Enter the prices and yield change to see the effective duration.
Worked example
With these example inputs:
- Price if yield falls$102
- Price if yield rises$98
- Current price$100
- Yield change1%
Effective duration: 2
- Price change$4.00
Frequently asked questions
What is effective duration?
It estimates how much a bond's price moves for a small change in yield. With prices of 102 and 98 around a base of 100 for a 1% yield shift, the duration is about 2.0.
How is it different from modified duration?
Effective duration uses actual repriced values, so it captures bonds with embedded options whose cash flows change. That makes it more accurate for callable or putable bonds.
What is effective duration in simple terms?
It measures how much a bond price moves when interest rates change. A higher number means the price reacts more to rate shifts. The tool finds it from three prices and a yield change. It gives you a single risk number for the bond.
Why use prices instead of cash flows?
Some bonds can be called or repaid early when rates change. That shifts their future payments, breaking the usual duration formulas. Effective duration sidesteps this by using observed prices. So it works even for bonds with embedded options.
What does a duration of, say, four mean?
It estimates that a one percent yield change moves the price about four percent. A higher number means a larger, riskier price swing. A lower number means the bond is more stable. It is only an estimate for small rate moves.