Canadian Securities Course (CSC) Practice Exam · Question
In the context of fixed-income, what does 'duration' measure?
Duration is a measure of a bond's price sensitivity to changes in interest rates. A higher duration indicates greater sensitivity, meaning the bond's price will
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Question: In the context of fixed-income, what does 'duration' measure?
Answer options:
- The remaining time until a bond matures. ✅ The bond's sensitivity to changes in interest rates.
- The annual coupon payment relative to the bond's price.
- The likelihood of the issuer defaulting on its payments.
Correct answer: The bond's sensitivity to changes in interest rates.
Explanation: Duration is a measure of a bond's price sensitivity to changes in interest rates. A higher duration indicates greater sensitivity, meaning the bond's price will fluctuate more with interest rate movements.
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