If an N year security recovered the same percentage of its cost in PV terms each year,the duration would be A)N. B)0. C)sum of the years/N. D)N!/N². E)none of the options.

Question

Quizplus · Accepted Answer

Duration measures the time it takes to receive the present value of cash flows generated by an investment. For an N year security that recovered the same percentage of its cost in PV terms each year, the cash flows are evenly distributed. Therefore, the duration can be calculated by taking the sum of the years and dividing it by N, resulting in option C.

If an N Year Security Recovered the Same Percentage of Its