Which of the Following Statements Is Correct Regarding Duration

question 575

Multiple Choice

Which of the following statements is correct regarding duration?

• A) It is a measure of the average price of a financial instrument.
• B) It doesn't take into account the timing and market value of cash flows.
• C) It increases if the average coupon increases.
• D) It decreases as maturity decreases

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Definitions:

Spot Rate

The existing rate at which a certain currency is available for immediate purchase or sale.

Forward Contract

A financial derivative instrument between two parties to buy or sell an asset at a specified future time at a price agreed upon today.

Settlement Date

The date on which a trade is finalized and the buyer must make payment and the seller deliver the asset.

Forward Rate

Refers to the agreed exchange rate for a currency transaction that will occur at a future date.