Duration is a ______ of the lengths of time until the remaining payments are made.

Question

Quizplus · Accepted Answer

Duration is a measure of the sensitivity of a bond's price to changes in interest rates, and it takes into account the timing and amount of all future cash flows, including coupon payments and principal repayment. Therefore, the best choice among the given options is weighted average, which reflects the proportional contribution of each payment to the total duration, based on their present value and time to maturity. Moving average and arithmetic average are not appropriate measures for duration because they do not consider the time value of money, while sensitivity measure is a broader concept that may include different factors affecting price changes.

Duration Is a ______ of the Lengths of Time Until