Which of the following statements about Macaulay duration is correct?
A) a bond's coupon rate and Macaulay duration are positively related.
B) a bond's Macaulay duration is inversely related to its yield-to-maturity.
C) The Macaulay duration of a zero-coupon bond is less than its time-to-maturity.

Question

Quizplus · Accepted Answer

Macaulay duration measures the weighted average time until a bond's cash flows are received, and it decreases as the yield to maturity increases because higher discount rates reduce the present value of later cash flows more than that of earlier cash flows. This makes the duration, or the weighted average time until cash flows, shorter.

Which of the Following Statements About Macaulay Duration Is Correct