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Macaulay duration is a time measure with units in years and really makes sense only for an instrument with fixed cash flows. For a standard bond, the Macaulay duration will be between 0 and the maturity of the bond. It is equal to the maturity if and only if the bond is a zero-coupon bond.
Formally, the duration gap is the difference between the duration - i.e. the average maturity - of assets and liabilities held by a financial entity. [3] A related approach is to see the "duration gap" as the difference in the price sensitivity of interest-yielding assets and the price sensitivity of liabilities (of the organization) to a change in market interest rates (yields).
Bond duration Bond duration is the weighted-average time to receive the discounted present values of all the cash flows (including both principal and interest), while WAL is the weighted-average time to receive simply the principal payments (not including interest, and not discounting). For an amortizing loan with equal payments, the WAL will ...
3.1 How bond duration changes with a changing interest ... Although the amortizing bond and the zero-coupon bond have different sensitivities at the same maturity, ...
At maturity, the issuer must repay the principal investment (face value) and any accrued interest. Ultra-short-term bonds (or cash equivalents) have a maturity of less than a year, such as 90-day ...
But almost always, the long maturity's rate will change much less, flattening the yield curve. The greater change in rates at the short end will offset to some extent the advantage provided by the shorter bond's lower duration. Long duration bonds tend to be mean reverting, meaning that they readily gravitate to a long-run average.
Consider short vs. long terms. Shorter terms give you more flexibility, while longer terms can help you prolong a good rate. ... “Put maturity dates on your calendar a week before they’re due ...
Higher Yields - In general, the APY for High Yield Savings Accounts is roughly 150 basis points higher than for US T-Bills of equivalent maturity at the time of this writing.