Fixed Income - Fixed Income Section 2
31. A bond duration is a measure of the sensitivity of:
- Option : B
- Explanation : A bond’s duration is a measure of the sensitivity of a bond’s full price including accrued interest to a change in interest rate.
- Option : C
- Explanation : The key rate duration is the sensitivity of bond to changes in a single spot rate, holding all other spot rates constant.
33. A zero-coupon bond with a time to maturity of 5 years has a YTM of 8%. Its Macaulay duration is:
34. As interest rates go up, the future value of reinvested coupon payments:
- Option : B
- Explanation : As interest rates go up, the future value of reinvested coupon payments increases.
- Option : C
- Explanation : The duration measure reduces due to higher coupon rate, higher yield to maturity, and shorter time to maturity.
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