Q648
In zero coupon bonds, impact of higher duration on maturity is that
A.
maturity will be zero
B.
maturity will be elastic
C.
maturity will be higher
D.
maturity will be lower
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
In zero coupon bonds, impact of higher duration on maturity is that maturity will be lower. A zero-coupon bond is a debt security instrument that does not pay interest. Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity. The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.