Duration is
A)the elasticity of a security's value to small coupon changes.
B)the weighted average time to maturity of the bond's cash flows.
C)the time until the investor recovers the price of the bond in today's dollars.
D)greater than maturity for deep discount bonds and less than maturity for premium bonds.
E)the second derivative of the bond price formula with respect to the YTM.

Question

Quizplus · Accepted Answer

Duration is defined as the weighted average time to maturity of the bond's cash flows, taking into account both the timing and amount of future cash flows. It is a measure of a bond's sensitivity to changes in interest rates, and is used to estimate the expected change in the bond's price for a given change in interest rates. The other choices are not accurate definitions of duration.

Duration Is