Duration is a useful number because it combines the effects of maturity, coupon, and market rates to indicate how the price of the bond will change with a change in interest rates.

Question

Quizplus · Accepted Answer

The three factors that determine the value of duration are the maturity of the bond, the market rate of interest, and the coupon rate. Duration is positively correlated with maturity but moves in the opposite direction of market rates of interest and coupon rates; that is, the higher the market rate of interest or the coupon rate, the lower the duration.

Duration Is a Useful Number Because It Combines the Effects