The duration of all floating rate debt instruments is
A)equal to the time to maturity.
B)less than the time to repricing of the instrument.
C)time interval between the purchase of the security and its sale.
D)equal to time to repricing of the instrument.

Question

Quizplus · Accepted Answer

The duration of a floating rate debt instrument is equal to the time to repricing of the instrument. This is because the interest rate on such instruments is periodically reset, and the duration measures the sensitivity of the instrument's price to changes in interest rates. Therefore, the duration is directly linked to the time to repricing, as this is when the interest rate is reset.

The Duration of All Floating Rate Debt Instruments Is