Statements regarding bond duration is incorrect

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Reference no: EM131879455

1. Calculate the duration of a 5-year bond that pays $60 annual coupons and has a 5% yield-to-maturity.

A. 5.20 years.

B. 4.76years.

C. 4.48 years.

D. 4.39 years.

2. Which of the following statements regarding a bond’s duration is incorrect?

A. Duration may be defined as the actual length of time needed to recover the initial bond investment.

B. Duration can be used as a measure of the bond’s sensitivity to interest rate (yield) changes.

C. For a bond that does not pay coupons, the duration is the same as its maturity.

D. The higher the coupon rate, the longer the duration, other things equal.

Reference no: EM131879455

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