Holding maturity constant, a bond's duration is ______ when the coupon rate is lower.

Question

Quizplus · Accepted Answer

When the coupon rate is lower, a bond's duration increases because the bond's cash flows are more heavily weighted towards the distant future. This is due to the fact that the lower coupon payments result in a larger final payment at maturity. Therefore, holding maturity constant, a bond's duration is higher when the coupon rate is lower.

Holding Maturity Constant, a Bond's Duration Is ______ When the Coupon