Which of the following will not affect a bank's duration estimate for the year?
A) Prepayments on loans that exceed expectations.
B) A 20-year corporate bond that is unexpectedly called in 6 months.
C) Certificates of deposit that are withdrawn early.
D) Holding a 30-year Treasury bond until maturity.
E) All of the above will affect a bank's estimated duration for the year.

Question

Quizplus · Accepted Answer

Holding a 30-year Treasury bond until maturity will not affect a bank's duration estimate for the year as the duration of the bond remains unchanged until maturity. In contrast, prepayments on loans that exceed expectations, unexpected call-in of a corporate bond, and early withdrawal of certificates of deposit all affect the bank's duration estimate.

Which of the Following Will Not Affect a Bank's Duration