Which of the following is NOT a true statement?
A) Duration measures the time until the principal is repaid.
B) Duration is the weighted average of the timing of the bond's payments.
C) The weights in the calculation of duration are the present value of each payment, divided by the value of the bond.
D) Modified duration measures the sensitivity of the bond's price to interest rate changes.

Question

Which of the following is NOT a true statement? 
A) Duration measures the time until the principal is repaid.
B) Duration is the weighted average of the timing of the bond's payments.
C) The weights in the calculation of duration are the present value of each payment, divided by the value of the bond.
D) Modified duration measures the sensitivity of the bond's price to interest rate changes.

Quizplus · Accepted Answer

Duration measures the price sensitivity of a bond to changes in interest rates, it does not measure the time until the principal is repaid.

Which of the Following Is NOT a True Statement