Which of the following is a true statement?
A)The longer the time to maturity of a security,the smaller will be the duration
B)The lower the coupon rate of a security,the higher the duration
C)For a given duration and change in interest rates,the change in the price of the security will be larger for a lower starting level of interest rates
D)The duration of a security remains constant no matter the level of market interest rates
E)All of the options are true statements.

Question

Quizplus · Accepted Answer

This statement is true according to the duration formula which states that the change in price of a security is proportional to its duration and the change in interest rates. Therefore, for a given duration, if the starting interest rate is lower, there is more room for interest rates to rise and the change in price will be larger. The other statements are false. A) The longer the time to maturity, the larger will be the duration. B) The lower the coupon rate, the lower the duration. D) The duration of a security changes as interest rates change.

Which of the Following Is a True Statement