A comprehensive measure of a bond's maturity that takes into account the timing of both coupon and principal payments is
A) term structure.
B) risk premium.
C) current coupon.
D) duration.

Question

Quizplus · Accepted Answer

Duration is a measure of a bond's sensitivity to changes in interest rates, but it also takes into account the timing of both coupon and principal payments, making it a comprehensive measure of a bond's maturity. Option A, term structure, refers to the relationship between interest rates and bond maturities. Option B, risk premium, is the additional return required for holding a risky asset, and is not related to the timing of payments. Option C, current coupon, is the fixed interest rate that a bond pays, but it does not incorporate the timing of principal payments.

A Comprehensive Measure of a Bond's Maturity That Takes into Account