Duration Is a Measure Of

question 12

Multiple Choice

Duration is a measure of:

• A) the yield to maturity of a bond.
• B) the coupon yield of a bond.
• C) the price of a bond.
• D) the effective maturity of a bond.

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Definitions:

Market Rate of Interest

The prevailing rate of interest for securities or loans in the market, determined by supply and demand and influenced by the general economic conditions.

Straight-Line Method

A depreciation technique where the value of an asset is evenly reduced over its operational life, ensuring a consistent depreciation charge each year.

Bond Premium

The additional value that an investor pays above a bond's face value; occurs when the bond's interest rate is higher than the market rate.

Bond Indenture

A legal document detailing the terms and conditions of a bond issue, including the interest rate, maturity date, and obligations of the issuer.