[Verse 1] When bonds start fluctuating, prices swing around Duration holds the secret to what makes them move It measures price sensitivity when rates shift ground A mathematical compass that portfolio managers use Five-year duration means a one percent rate climb Drops your bond value by five percent each time [Chorus] Duration tells the tale, how bonds will sail When interest rates change direction Price sensitivity's key, D-U-R-A-T-I-O-N Your portfolio's protection Modified duration's the tool, Macaulay's the rule Both measure time and risk connection [Verse 2] Macaulay duration weighs each payment's present worth Calculates the average time till cash flows arrive But modified duration shows what price moves are worth When yield curves shift and interest rates come alive Divide Macaulay by one plus the yield today That's modified duration showing price decay [Chorus] Duration tells the tale, how bonds will sail When interest rates change direction Price sensitivity's key, D-U-R-A-T-I-O-N Your portfolio's protection Modified duration's the tool, Macaulay's the rule Both measure time and risk connection [Bridge] Portfolio managers immunize their positions Matching duration targets with precision Longer duration means more volatility Shorter duration brings stability When rates rise up, long bonds fall down Duration predicts by how many pounds [Verse 3] Risk managers use duration like a weathervane Hedging interest rate exposure with careful math High duration portfolios feel more price pain Low duration smooths the bumpy market path Duration matching locks in future returns While duration gaps show where portfolio burns [Chorus] Duration tells the tale, how bonds will sail When interest rates change direction Price sensitivity's key, D-U-R-A-T-I-O-N Your portfolio's protection Modified duration's the tool, Macaulay's the rule Both measure time and risk connection [Outro] Remember the formula when markets get rough Duration times rate change shows price movement stuff Your bond portfolio's compass through stormy weather Duration keeps risk and return bound together
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