All Other Things Equal, a Bond's Duration Is ________

question 7

Multiple Choice

All other things equal, a bond's duration is ________.

• A) higher when the coupon rate is higher
• B) lower when the coupon rate is higher
• C) the same when the coupon rate is higher
• D) indeterminable when the coupon rate is high

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Definitions:

Fair Values

The estimated market value of an asset or liability, reflecting the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Collateralized Loan

A loan that is secured by collateral, assets that the lender can seize if the borrower fails to repay the loan.

Prepaid Interest

The amount of interest that is paid in advance of the period to which it relates, often associated with loans or mortgages.

Loan Payable

Loan Payable is the liability account in a company’s balance sheet representing the amount owed to lenders that must be paid back in the future.