Which one of the following statements is true concerning the duration of a perpetuity?
A) The duration of a 15% yield perpetuity that pays $100 annually is longer than that of a 15% yield perpetuity that pays $200 annually.
B) The duration of a 15% yield perpetuity that pays $100 annually is shorter than that of a 15% yield perpetuity that pays $200 annually.
C) The duration of a 15% yield perpetuity that pays $100 annually is equal to that of a 15% yield perpetuity that pays $200 annually.
D) The duration of a perpetuity cannot be calculated.

Question

Quizplus · Accepted Answer

The duration of a perpetuity is independent of the payment amount and depends solely on the yield rate. Therefore, perpetuities with the same yield rate have the same duration regardless of the payment amount.

Which One of the Following Statements Is True Concerning the Duration