The duration of a par-valueannual bond with a coupon rate of 6.5% and a remaining time to maturity of 4 years is

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The duration of a bond is a measure of the sensitivity of its price to changes in interest rates, essentially representing the weighted average time until the bond's cash flows are received. For a bond with a coupon rate of 6.5% and 4 years to maturity, the duration will be less than its maturity because the bondholder receives interest payments before the bond's maturity, thus reducing the bond's sensitivity to interest rate changes compared to a zero-coupon bond that pays no interest until maturity. The exact duration can be calculated using the formula for Macaulay duration, but without performing the calculation, it's understood that the duration will be less than the maturity, making 3.65 years a plausible answer among the given options.

The Duration of a Par-Valueannual Bond with a Coupon Rate