Other things being equal, assets with shorter maturities have ____ durations. Assets that generate more frequent coupon payments have ____ durations.
A)shorter; longer
B)shorter; shorter
C)longer; shorter
D)longer; longer

Question

Quizplus · Accepted Answer

Duration measures the sensitivity of a bond's price to changes in interest rates. Assets with shorter maturities and those that generate more frequent coupon payments both have shorter durations because they return capital to investors more quickly, reducing interest rate risk.

Other Things Being Equal, Assets with Shorter Maturities Have ____