Duration:
A) is always greater than maturity.
B) rises as the coupon payment rises.
C) measures how bond prices change with changes in maturity.
D) is a measure of total return.
E) is a measure of how price sensitive a bond is to a change in interest rates.

Question

Quizplus · Accepted Answer

Duration is a measure of how sensitive a bond's price is to changes in interest rates. The longer the duration, the more sensitive the bond price is to changes in interest rates. Duration is not the same as maturity, as a bond's maturity is simply the date at which it will be paid back in full. Duration also does not measure how bond prices change with changes in maturity, nor is it a measure of total return. While higher coupon payments can lead to a higher duration, this is not always the case.