CFA Practice Question

There are 266 practice questions for this study session.

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:

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
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