Which of the Following Bonds Has the Longest Duration

question 44

Multiple Choice

Which of the following bonds has the longest duration?

• A) A 12-year maturity, 0% coupon bond.
• B) A 12-year maturity, 8% coupon bond.
• C) A 4-year maturity, 8% coupon bond.
• D) A 4-year maturity, 0% coupon bond.
• E) Cannot tell from the information given

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Definitions:

Carrying Amount

The book value of assets or liabilities as recorded in the financial statements, after accounting for depreciation, amortization, or impairment.

Residual Value

The estimated remaining value of an asset at the end of its useful life.

Units-of-Production Method

A depreciation method that allocates expense based on the actual usage or output of the asset, reflecting its wear and tear more accurately.

Depreciation Expense

A financial approach to distribute the expense of a physical asset throughout its operational lifespan.