Which one of the following statements is true concerning the duration of a perpetuity
A)The duration of 15% yield perpetuity that pays $100 annually is longer than that of a 15% yield perpetuity that pays $200 annually.
B)The duration of a 15% yield perpetuity that pays $100 annually is shorter than that of a 15% yield perpetuity that pays $200 annually.
C)The duration of a 15% yield perpetuity that pays $100 annually is equal to that of 15% yield perpetuity that pays $200 annually.
D)The duration of a perpetuity cannot be calculated.

Question

Quizplus · Accepted Answer

Duration of a perpetuity = (1 + y)/y; thus, the duration of a perpetuity is determined by the yield and is independent of the cash flow.

Which One of the Following Statements Is True Concerning the Duration