CFA Practice Question

CFA Practice Question

Which of the following is incorrect?
A. Macaulay duration is larger than modified duration.
B. The duration of an asset is the durations of cash flows (the asset produces) weighted by their present values.
C. The duration of a Zero is less than a coupon paying bond of the same maturity.
Explanation: The duration of a coupon paying bond is the weighted sum of the present values of cash flows and maturities, and this must necessarily be lower than the duration of a Zero where all cash flows occur at maturity.

User Contributed Comments 1

User Comment
jpducros remember, draw a vertical line : on the left : Coupon and YTM
On the right : Maturity, Duration, Price....

All else equal, when left item rise, right items drop....
You need to log in first to add your comment.