The tendency of the variance of a bond's price to decrease as maturity approaches is called
A)open interest.
B)pull-to-par.
C)digital default option.
D)futures option.

Question

Quizplus · Accepted Answer

Pull-to-par refers to the tendency of the price of a bond to move towards its par or face value as it approaches maturity. As the bond nears maturity, its cash flows become more certain, resulting in a decrease in the variance of the bond's price. Therefore, option B is the correct choice. A, C, and D are not relevant to the concept of pull-to-par.

The Tendency of the Variance of a Bond's Price to Decrease