The Option Adjusted Duration Will Approach the Duration to Maturity

question 91

Multiple Choice

The option adjusted duration will approach the duration to maturity, when

• A) interest rates are significantly above the coupon rate because the option has very little chance of being called, and the call option will have very little value.
• B) interest rates are significantly below the coupon rate because the option has very little chance of being called, and the call option will have very little value.
• C) interest rates are significantly above the coupon rate because the option has a high chance of being called, and the call option will have significant value.
• D) interest rates are significantly below the coupon rate because the option has a high chance of being called, and the call option will have significant value.
• E) None of these are correct.

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