Question

All other things equal (YTM = 10%), which of the following has the longest duration? A....

All other things equal (YTM = 10%), which of the following has the longest duration? A. a 30-year bond with a 10% coupon B. a 20-year bond with a 9% coupon C. a 20-year bond with a 7% coupon D. a 30-year zero-coupon bond

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Answer #1

All other things equal (YTM = 10%), which of the following has the longest duration?

A. a 30-year bond with a 10% coupon

B. a 20-year bond with a 9% coupon

C. a 20-year bond with a 7% coupon

D. a 30-year zero-coupon bond

The correct answer is option D. a 30-year zero-coupon bond has the longest duration.

  • Lower the coupon, longer is the duration, and vice versa.
  • Longer the maturity, longer is the duration, and vice versa.

Options A, B, and C are incorrect because their coupon is higher than that of a zero-coupon bond and the maturity is lower or equal to 30 years

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