Which of the following is NOT true about duration?
A) It equals the years-to-maturity for a zero coupon bond
B) It equals the weighted average of payment times for a bond, where weights are proportional to the present value of payments
C) Equals the weighted average of individual bond durations for a portfolio, where weights are proportional to the present value of bond prices
D) The prices of two bonds with the same duration change by the same percentage amount when interest rate move up by 100 basis points

Question

Quizplus · Accepted Answer

The statement in option D is not true. While duration measures the sensitivity of a bond's price to changes in interest rates, the percentage change in price for two bonds with the same duration may not be the same if the bonds have different coupon rates or different maturity dates.

Which of the Following Is NOT True About Duration