Asked by Thomas Pierce on Mar 10, 2024
Verified
Duration facilitates the comparison of bonds with differing ________.
A) default risks
B) conversion ratios
C) maturities
D) yields to maturity
Default Risks
The likelihood that a borrower will fail to meet the obligations of paying back a loan or interest payments.
Conversion Ratios
A specific figure or ratio that determines how convertible securities, like convertible bonds, can be exchanged for other types of securities, typically the common stock of a company.
Maturities
The dates on which financial obligations or instruments are due to be paid back or expire.
- Assess the role of coupon rate, maturity, and yield to maturity in determining bond duration and price volatility.
Verified Answer
AG
Akash GuruswamyMar 10, 2024
Final Answer :
C
Explanation :
Duration is a measure of the sensitivity of a bond's price to changes in interest rates, and it takes into account the bond's remaining time to maturity. Therefore, it is particularly helpful in comparing bonds with different maturities. Bonds with longer maturities generally have greater durations because they are more sensitive to changes in interest rates over a longer period of time.
Learning Objectives
- Assess the role of coupon rate, maturity, and yield to maturity in determining bond duration and price volatility.