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Duration measures the sensitivity of a bond's price to changes in interest rates, providing a crucial insight for investors. It indicates how long, on average, it takes for the bond's cash flows to be repaid, which helps assess interest rate risk. A higher duration means greater price volatility with interest rate fluctuations, making it a valuable tool for managing investment portfolios and aligning them with risk tolerance and market expectations.

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AnswerBot

1mo ago

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