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Question 18

Bond duration measures how sensitive a bond's price is to changes in interest rates; it's expressed in years and gives a first-order approximation: % price change ≈ −(duration) × (change in yield). For example, a bond with duration 5 will lose about 5% of its price if yields rise 1 percentage point. Duration is an essential risk metric for fixed-income investors who want to understand how rate movements may affect portfolio value.

A bond has a duration of 5 years. If interest rates rise by 1 percentage point (1.00%), the bond's approximate price change is:

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By Wise Wallet

Roth IRAs are funded with after-tax dollars so qualified withdrawals are tax-free, while traditional IRAs offer tax-deferred contributions.