The duration of a bond normally increases with an increase in

Question

Quizplus · Accepted Answer

The duration of a bond is a measure of its sensitivity to changes in interest rates. Since longer-term bonds are more sensitive to interest rate changes, the duration will increase with an increase in term to maturity. The yield to maturity and coupon rate may also affect the duration, but not consistently in the same direction as term to maturity. Therefore, the best choice is A.

The Duration of a Bond Normally Increases with an Increase