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Duration can measure how long it takes, in years, for an investor to be repaid a bond’s price by the bond’s total cash flows. Duration can also measure the sensitivity of a bond’s or fixed income portfolio’s price to changes in interest rates.

A bond’s duration is easily confused with its term or time to maturity because certain types of duration measurements are also calculated in years.

However, a bond’s term is a linear measure of the years until repayment of principal is due; it does not change with the interest rate environment. Duration, on the other hand, is nonlinear and accelerates as the time to maturity lessens.

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