Question

    The _____ measures the price volatility of fixed income securities.

    A Yield to maturity Correct Answer Incorrect Answer
    B Convexity Correct Answer Incorrect Answer
    C Duration Correct Answer Incorrect Answer
    D Yield to call Correct Answer Incorrect Answer
    E Concavity Correct Answer Incorrect Answer

    Solution

    Duration (Macaulay duration) measures the price volatility of fixed income securities. It is often used in the comparison of the interest rate risk between securities with different coupons and different maturities. It is the weighted average of the present value of all the cash flows associated with a fixed income security. It is expressed in years. The duration of a fixed income security is always shorter than its term to maturity, except in the case of zero coupon securities where they are the same

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