SIE practice questionhardDuration
As coupon rates decrease and maturity increases, what happens to duration?
- AIt decreases
- BIt increases✓ Correct answer
- CIt stays the same
- DIt is unaffected by these factors
Explanation
Why B — It 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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