Bond cash flows and duration
Part of the Markets learning and recruiting path. Read the explanation and example, attempt the task, then open the self-check.
Know what to learn for your role.
From foundations to a work sample, with sources, tasks and self-checks.
Understand
A fixed-rate bond pays coupons and principal. Yield is a discount rate, not the coupon. Modified duration approximates sensitivity to small yield moves; larger moves also require convexity.
Worked example
With modified duration 4 and a 0.5 percentage-point yield rise, price change is approximately −4 × 0.005 = −2%.
Examples and numbers are educational, not employer questions, live market data or hiring criteria.
Practise and keep your output
List cash flows for a three-year bond and test yields up and down. State the approximation limits.
Keep inputs and sources, assumptions, steps, results and uncertainties in your own document. Attempt independently before checking below.
After attempting: answer and self-check
For a conventional positive-duration bond, rising yields generally lower price. Use 0.005 for a 0.5% change.
Official channels and further reading
Pathline authors these starter lessons. These supplementary field links do not imply provider review or endorsement. Confirm Hong Kong availability and eligibility separately.
- JPMorganChase · Students and graduates ↗
Global programme directory. Filter by function, location and intake.
- CFA Institute · Investment Foundations ↗
Investment topic reference; the certificate course may be paid. Our starter lessons are free.