Modified duration:
A)estimates when embedded options will be used.
B)directly indicates how much the price of a security will change given a change in interest rates.
C)is always greater than maturity.
D)All of the above
E)a.and b.

Question

Quizplus · Accepted Answer

Modified duration is a measure of the sensitivity of the price of a fixed-income asset to a change in interest rates. It provides an estimate of the percentage change in the price of the asset for a given change in yield. It does not take into account embedded options, and it can be greater or less than the maturity of the bond, depending on the coupon rate and the level of interest rates.

Modified Duration