The duration of a ten year 10 percent $1,000 bond at a market rate of 6 percent is exactly equal to the duration of the same bond at a 14 percent market rate.

Question

Quizplus · Accepted Answer

The duration of a bond decreases with an increase in market interest rates. Therefore, the duration of the bond would be lower at a 14 percent market rate compared to a 6 percent market rate. Thus, the statement is false.

The Duration of a Ten Year 10 Percent $1,000 Bond