Duration is a measure of a bond’s sensitivity to changes in interest rates.
Duration = (V- − V+) / [2V0(change in required yield)] where:
V- = estimated price if yield decreases by a given amount
V+ = estimated price if yield increases by a given amount
V0 = initial observed bond price
Thus, duration = (103.14 − 96.99) / (2 × 100 × 0.005) = 6.15. Remember that the change in interest rates must be in decimal form.
