Modify duration can be used to estimate the change in the price of a bond as interest rates change. However, there is a weakness with doing that which comes from the assumption that is embedded into the modified duration calculation that the relationship between yields and bond prices is a linear relationship. However, in reality the relationship between yields and bond prices is a convex relationship as can be seen from this diagram. If we were to take the current yield in the middle there and assume that interest rates fell the modified duration assumption would be that the price would move in a linear relationship. However, given that there is convexity in the relationship between yields and prices modified duration would underestimate the increase in the price of the bond. Similarly, if we assume that there was going to be an increase in yields and therefore a fall in the bonds price. What if I duration would overestimate the decrease in the price? However, whichever way around we look at this. The new price that we would get to under an assumption of modified duration would be too low compared to the actual new price of the bond. So we would need to add on an adjustment to get up to the actual new price.