If you hold yield to maturity constant and plot bond duration as a function of years until maturity, the curve has a _____ first derivative and a _____ second derivative.
A) positive, positive
B) positive, negative
C) negative, positive
D) negative, negative

Question

Quizplus · Accepted Answer

The first derivative is positive because as years until maturity increase, bond duration generally increases. The second derivative is negative because the rate of increase in duration decreases as maturity increases, reflecting the convexity of the duration-maturity relationship.

If You Hold Yield to Maturity Constant and Plot Bond