The duration of a bond normally increases with an increase in:
I. Term to maturity
II. Yield to maturity
III. Coupon rate

Question

Quizplus · Accepted Answer

The duration of a bond is directly proportional to its term to maturity, meaning that as the maturity increases, so does the duration. However, changes in yield to maturity and coupon rate can have conflicting effects on duration, and the overall impact depends on the specific characteristics of the bond. Therefore, choices II and III cannot be considered reliable predictors of duration changes.

The Duration of a Bond Normally Increases with an Increase