understanding financial jargon
Bond duration is the 'mid point' in the life of the bond, where a bond holder is waiting for as much cashflow (from the remaining fixed coupons and the return of the original capital) as they have already received.
A simple example would be of a 15 year bond which would be redeemed for £100 and paying a coupon of £10 annually. After 12 years you would have received £120 in coupon payments, and be awaiting a further £130 (£30 in coupons and the repayment of the £100 face value), therefore with these values being almost equal, the duration would be approximately 12 years.
Bond duration and maturity are often confused, but as you can see from the above example the maturity would be after 15 years, with the duration being just over 12 years.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
We hope you found this information useful.
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