Which of the Following Statements Is True

question 111

Multiple Choice

Which of the following statements is true?

• A) An increase in coupons increases the duration of the bond.
• B) The longer the maturity of a bond, the greater will be its duration.
• C) An increase in the interest rate decreases the duration of the bond.
• D) Duration is a measure of the sensitivity of the equities.

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Definitions:

Unsecured

Pertaining to loans or debts that are not backed by collateral, making them riskier for lenders.

Debenture

A type of debt instrument that is not secured by physical assets or collateral but is based on the issuer's creditworthiness and reputation.

Risk Premium

The additional return over the risk-free rate that an investment is expected to yield, compensating investors for taking on higher risk.

Default Risk

The risk of loss arising from a debtor failing to make required payments on their debt obligation.