Which form of duration should be used when evaluating a floating-rate bond?
A) Macaulay duration
B) Modified duration
C) Effective duration
D) Convexity duration

Name: Which form of duration should be used when evaluating a floating-rate bond? A) Macaulay duration B) Modified duration C) Effective duration D) Convexity duration
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Question

Quizplus · Accepted Answer

Effective duration is used for bonds with embedded options or floating-rate bonds, as it accounts for changes in interest rates and the bond's cash flows.

Which Form of Duration Should Be Used When Evaluating a Floating-Rate