Which of the Following Is NOT True About Duration

question 6

Multiple Choice

Which of the following is NOT true about duration?

• A) It equals the years-to-maturity for a zero coupon bond
• B) It equals the weighted average of payment times for a bond, where weights are proportional to the present value of payments
• C) Equals the weighted average of individual bond durations for a portfolio, where weights are proportional to the present value of bond prices
• D) The prices of two bonds with the same duration change by the same percentage amount when interest rate move up by 100 basis points

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Definitions:

Fixed Asset

Long-term tangible property or equipment that a firm owns and uses in its operations to generate income.

Liquidity

The convenience with which one can convert an asset into cash without influencing its market price.

Financial Distress

A situation in which a company struggles to meet or has difficulty paying off its financial obligations to creditors.

Liquid Assets

Assets that can be quickly and easily converted into cash without significant loss of value.