Enter the Macauley duration, the yield to maturity, and the number of coupon periods period year to calculate the modified duration.

## Modified Duration Formula

The following formula is used to calculate a modified duration.

MD = MCD / (1+ YTM/n)

- Where MD is the modified duration\
- MCD is the Macauley duration
- YTM is the yield to maturity
- n is the number of periods per year

## Modified Duration Definition

A modified duration is defined as the ratio of the change in value of a security with the change in value of the interest rate.

## Modified Duration Example

How to calculate a modified duration?

**First determine the Macauley Duration.**Calculate the weighted average term to maturity of the cash flows from a bond.

**Next, determine the yield to maturity.**Calculate the yield to maturity of the given security.

**Next, determine the number of coupon period per year.**As stated, calculate the number of periods per year.

**Finally, calculate the modified duration.**Use the formula and information from steps 1-3 to calculate the modified duration.

## FAQ

**What is a modified duration?**

A modified duration is a measure of the change of the value of a security from the change in it’s interest rates.

**What is Macauley duration?**

Macauley duration is the weighted average term to maturity of the cash flows from a bond.