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Class 8 Tuition > Learn Class VI-VIII Tuition > What is the relationship between yield, price and...
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What is the relationship between yield, price and modified duration of a coupon bond?

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Two basic yield measures for a bond are its coupon rate and its current yield. Par value Annual coupon Coupon rate = Bond price Annual coupon Current yield
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1)Bond prices and bond yields move in opposite directions. -- As a bond’s yield increases, its price decreases. -- Conversely, as a bond’s yield decreases, its price increases. 2)For a given change in a bond’s YTM (Yield to maturity), the longer the term to maturity of the bond, the greater the...
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1)Bond prices and bond yields move in opposite directions. – As a bond’s yield increases, its price decreases. – Conversely, as a bond’s yield decreases, its price increases. 2)For a given change in a bond’s YTM (Yield to maturity), the longer the term to maturity of the bond, the greater the magnitude of the change in the bond’s price. Modified duration is the approximate percentage change in a bond's price for a 100 basis points change in yield, assuming that the bond's expected cash flow does not change when the yield changes. read less
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Business Analyst in Investment banking with 9 years of solid global industry experience

They are intrlinked to earning coupon for the period
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maths,science..

They are inversly proprtinal to each other
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TEACHING MATHS

When price goes up, yield goes down and vice versa. Technically, you'd say the bond's price and its yield are inversely related.
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* The bond is called by the issuer at the first possible date is called yield to call (YTC) * A call usually occurs after a fall in market interest rates that allows issuers to refinance outstanding debt with new bonds. Bond prices move inversely with interest rates. * For a given absolute change...
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* The bond is called by the issuer at the first possible date is called yield to call (YTC) * A call usually occurs after a fall in market interest rates that allows issuers to refinance outstanding debt with new bonds. Bond prices move inversely with interest rates. * For a given absolute change in a bond’s yield to maturity, the magnitude of the price increase caused by a decrease in yield. Decreasing yields cause bond prices to rise, but long-term bonds increase more than short-term. Similarly, increasing yields cause long-term bonds to decrease in price more than short-term bonds. We know that Modified duration = - (1/p) * [( Dp)/(Dy )] where p is the bond price, Dp is the change in bond price and Dy is the change in the required rate of return (yield to maturity). From the above formula, we can see that Dp/ Dy is the first derivative of the bond price with respect to yield to maturity. read less
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Price and yield are inversely proportional.
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When price goes up, yield goes down and vice versa. Technically, you'd say the bond's price and its yield are inversely related.
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Modified duration is a modified version of the Macaulay model that accounts for changing interest rates.
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