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115 CFA
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115.070.05.07 Fixed Income - Reading 46 - 7. Interest Rate Risk and the Investment Horizon

7. Interest Rate Risk and the Investment Horizon

j. describe how the term structure of yield volatility affects the interest rate risk of a bond;

k. describe the relationships among a bond's holding period return, its duration, and the investment horizon;

What are the two yield volatility risks for default-free bonds?
1. interest rate shifts
2. risk of changes in the volatility of interest rates

What is a duration gap?
The duration gap is the difference between the Macaulay duration and the investment horizon.


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  • CFA