Duration is considered a good measure of risk for a bond portfolio because it indicates the relative volatility of the bond or portfolio due to interest rate changes and the rating of the bonds.

Question

Quizplus · Accepted Answer

Duration primarily measures the sensitivity of a bond's or bond portfolio's price to changes in interest rates, not directly the rating of the bonds. Bond ratings indicate credit risk, which is a different type of risk.

Duration Is Considered a Good Measure of Risk for a Bond