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SIE: Debt Securities
SIE practice questionhardDuration

As coupon rates decrease and maturity increases, what happens to duration?

  1. AIt decreases
  2. BIt increases✓ Correct answer
  3. CIt stays the same
  4. DIt is unaffected by these factors
Explanation

Why BIt increases

Lower coupons and longer maturities increase a bond’s duration, raising interest rate sensitivity. Higher coupons and shorter maturities reduce duration.

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