The lower the coupon or interest payment on a security:
A)the lower its duration
B)coupon or interest payments have no impact on a security's duration
C)the higher its duration
D)None of the listed options are correct.

Question

Quizplus · Accepted Answer

The duration of a security measures how sensitive it is to changes in interest rates. Securities with lower coupon or interest payments have a longer duration because their cash flows are weighted more heavily toward the distant future, which is when interest rate changes will have a greater impact.

The Lower the Coupon or Interest Payment on a Security