A zero-coupon security's duration
A) Is equal to its maturity
B) Does not vary with interest rates
C) Is longer than that of a comparable-maturity coupon security
D) All of the above

Question

Quizplus · Accepted Answer

A zero-coupon security's duration is equal to its maturity because it pays no coupons and all its cash flow occurs at maturity. Its duration does not vary with interest rates for the same reason, and it is longer than that of a comparable-maturity coupon security because coupon securities pay interest before maturity, reducing their average maturity.

A Zero-Coupon Security's Duration