Question

Can anyone explain me what does it mean that duration of a bond is 11 years, for example?

Answer 1

I trade Bond Futures, and I can tell you 'Gorica' that the duration of the bond means that its Yeild to Maturity is 11 Years. For example, An investor wants to invest in 30 Year U.S Treasury Bonds. The investor would pay at a minimum of $1,00 par value for the bond. the bond would pay that investor a Yield which is like a dividend payment on the Initial investment. The investor (in this case) will after 11 years receive the principal as well as the interest payments the Fed payed the bondholder. Email me if you have any other questions ~max