The duration of a bond normally increases with an increase in
A) term to maturity.
B) yield to maturity.
C) coupon rate.
D) All of the options are correct.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The duration of a bond typically increases with an increase in its term to maturity because longer-term bonds have cash flows that are spread out over a longer period, making them more sensitive to changes in interest rates. Conversely, duration generally decreases with an increase in yield to maturity and coupon rate, as higher yields and coupons mean that a greater portion of the bond's cash flows are received earlier.

The Duration of a Bond Normally Increases with an Increase