Written, signed, unconditional, and unsecured promise by one party (the maker or promisor) to another (the payee or promisee) that commits the maker to pay a specified sum on demand, or on a fixed or a determinable date. Promissory notes (such as bank or currency notes) are negotiable instruments.
Advanced Bond Concepts: Duration. The term duration has a special meaning in the context of bonds. It is a measurement of how long, in years, it takes for the price of a bond to be repaid by its internal cash flows. It is an important measure for investors to consider, as bonds with higher durations carry more risk and have higher price volatility than bonds with lower durations.
10-Year Bond Vs. 6-Month Bond. *A simultaneous change in interest rates across the bond yield curve. This hypothetical example is an approximation that ignores the impact of convexity; we assume the duration for the six-month bonds and 10-year bonds in this example to be 0.38 and 8.87, respectively.