Implications:

Duration allows bonds of different maturities and coupon rates to be directly compared.

The higher the duration, the higher the risk of price changes as interest rates change. 

- Constructing a bond portfolio based on weighted average duration provides the ability to determine value changes based on forecasted changes in interest rates.

- The interest rate sensitivity of a bond portfolio can only be estimated if there is a change in interest rates that leads to a parallel shift in the yield curve. In general, bonds of different maturities seldom experience the same change in rates (i.e., parallel shift in the yield curve). Thus, two bond portfolios that may have the same duration at the beginning of the investment horizon may end up being affected differently by interest rate changes one period later, depending on how the yield curve has moved.

- Neither basic duration formula can be used to estimate interest rate sensitivity of callable bonds because changes in interest rates may affect not only the prices of the bonds but the receipt of the cash flows as well. This is because the bonds may be called as a result of changes in interest rates. The use of effective duration modelling can significantly improve these limitations.