Which of the following statements about duration is most correct?
A) Duration for a coupon bond is greater than its maturity.
B) For a zero-coupon bond, the duration is equal to its maturity.
C) For bonds with the same maturity and selling at the same yield, the lower the coupon rate, the greater a bond's duration and volatility.
D) For bonds with the same coupon rate and selling at the same yield, the longer the maturity, the larger the duration and price sensitivity.
E) b, c, and d only.

Question

Quizplus · Accepted Answer

B) For a zero-coupon bond, the duration is always equal to its maturity because there are no intermediate cash flows before maturity. C) Lower coupon rates result in higher duration because the bond's cash flows are more back-loaded, making the bond more sensitive to interest rate changes. D) Longer maturity bonds have larger durations and are more sensitive to interest rate changes because their cash flows are received further in the future.

Which of the Following Statements About Duration Is Most Correct