Products & Their RisksQuestion 43 of 398
Duration is a measure that helps investors estimate:
a.A bond's credit rating
b.The issuer's likelihood of default
c.How sensitive a bond's price is to changes in interest rates
d.The amount of accrued interest owed at settlement
Explanation
Duration estimates the percentage change in a bond's price for a given change in interest rates, so higher duration means greater interest-rate sensitivity. It does not measure credit rating, default probability, or accrued interest.
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