- CFA Exams
- CFA Level I Exam
- Study Session 15. Fixed Income (2)
- Reading 46. Understanding Fixed-Income Risk and Return
- Subject 3. Properties of Bond Duration
CFA Practice Question
A longer time-to-maturity might lead to a lower duration for a bond priced at a discount. This situation only occurs if ______
II. the coupon rate is high.
III. the time-to-maturity is long.
IV. the yield-to-maturity is low.
I. the coupon rate is low.
II. the coupon rate is high.
III. the time-to-maturity is long.
IV. the yield-to-maturity is low.
A. I and III
B. II and III
C. I and IV
Explanation: A long-term, low-coupon bond may have a lower duration than a shorter-term bond.
User Contributed Comments 2
| User | Comment |
|---|---|
| ecapocas | Not making any sense to me....a lower coupon means more of the realizable NPV occurs at the end of the timeline(and thus a higher duration), and a longer term by definition means a longer duration. So how on earth do these things result in a “lower duration”? |
| fatherlee | I don’t get it |