Which of the Following Is NOT True About Duration

question 17

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 moves up by 100 basis points

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Definitions:

Negotiable

Something that can be discussed or altered in order to reach an agreement; in finance, refers to instruments like checks or bills of exchange that can be transferred to another party.

Optional Payment

A payment made by choice as opposed to requirement, often seen in loan agreements where the borrower may pay more than the minimum due.

Maturity Date

the specific date on which a financial instrument, such as a loan or bond, reaches its expiration and the principal is due to be repaid.

Promissory Note

A financial instrument containing a written promise by one party to pay another a definite sum of money either on demand or at a specified future date.