The only difference between the simple weighted average life of a bond and duration of a bond is:

Question

Quizplus · Accepted Answer

The simple weighted average life of a bond is calculated by weighting the time to each cash flow by the present value of that cash flow, while duration involves the present value of individual cash flows and their timing. Therefore, the only difference between the two is the way they treat the cash flows in terms of their present value. Option A is incorrect because both methods take into account the timing of interest payments, and option C is incorrect because both methods use the present value of cash flows. Option D is incorrect as well because there is a difference, as discussed above.

The Only Difference Between the Simple Weighted Average Life of a Bond