SIE practice questionhardDuration
All else equal, which bond will have the longest duration?
- A10-year, 8% coupon bond
- B10-year, 4% coupon bond✓ Correct answer
- C5-year, 4% coupon bond
- D5-year, 8% coupon bond
Explanation
Why B — 10-year, 4% coupon bond
Duration increases with longer maturity and lower coupon. The 10-year, 4% coupon bond has both, so it has the longest duration. Higher coupons or shorter maturities reduce duration.
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