A question I've never found the exact answer to.
Bond total return is made up of two parts, income return and capital return.
Duration measures the sensitivity of bonds to interest rate movement
Question: If a bond fund's duration is 4 years, does a 1% increase in interest rates drop the total return by 4% or just the capital return?
Bond total return is made up of two parts, income return and capital return.
Duration measures the sensitivity of bonds to interest rate movement
Question: If a bond fund's duration is 4 years, does a 1% increase in interest rates drop the total return by 4% or just the capital return?