- CFA Exams
- CFA Exam: Level I 2021
- Study Session 15. Fixed Income (2)
- Reading 46. Understanding Fixed-Income Risk and Return
- Subject 7. Interest Rate Risk and the Investment Horizon
CFA Practice Question
Which duration measure indicates the investment horizon in which coupon reinvestment risk and market risk offset each other?
B. Modified duration
C. Effective duration
A. Macaulay duration
B. Modified duration
C. Effective duration
Correct Answer: A
For a particular assumption about yield volatility, the Macaulay duration indicates the investment horizon in which coupon reinvestment risk and market price risk offset each other.
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