- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 10. Interest Rate Risk and Return
- Subject 2. Macaulay Duration
CFA Practice Question
An investor purchases a zero-coupon bond with 10 years remaining until maturity. The yield-to-maturity of the bond is 10%. The investor's investment horizon is five years. The duration gap at the time of purchase is closest to:
B. six years
C. Not enough information
A. five years
B. six years
C. Not enough information
Correct Answer: A
The Macaulay duration of a zero-coupon bond is its time-to-maturity. Macaulay duration (10) - investment horizon (5) = duration gap (5).
User Contributed Comments 2
| User | Comment |
|---|---|
| Kevdharr | Remember that duration for a zero coupon bond is equal to its YTM. |
| GBolt93 | No it's equal to its time to maturity. YTM would make absolutely no sense |