Question

The duration of a bond is: Fixed for the life of a bond only if interest...

The duration of a bond is:

  1. Fixed for the life of a bond only if interest rates do not change and the bond does not have any options embedded
  2. None of the above of the bond
  3. Fixed for the life of the bond
  4. Fixed for the life of a bond only if interest rates do not change
  5. Always equals to time to maturity for bonds trading at PAR
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Answer #1

Duration is fundamental measurement of sensitivity of a bond price to change with interest rate, coupon, and call features.

Option :Fixed for the life of the bond : false as Duration of bond is different for different market situation

Option :Fixed for the life of a bond only if interest rates do not change : False duration may change with change in other factors like call premium

Option : Always equals to time to maturity for bonds trading at PAR. False as Duration of bond is different form maturity timr

Option: Fixed for the life of a bond only if interest rates do not change and the bond does not have any options embedded. True may true in certain market situation.

Answer :Fixed for the life of a bond only if interest rates do not change and the bond does not have any options embedded

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