Investment VehiclesQuestion 19 of 110
Duration is best described as a measure of which of the following?
a.The number of years until a bond matures, exactly
b.A bond's price sensitivity to changes in interest rates
c.The bond's credit rating quality
d.The total coupon income a bond will pay
Explanation
Duration measures how sensitive a bond's price is to interest rate changes; a longer duration means greater price movement for a given rate change. It is expressed in years but is not simply the maturity. Credit quality and total coupon income are separate concepts.
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