Duration of a ZCB repayable after seven years will be: Select one: a. More than seven...

Duration of a ZCB repayable after seven years will be: Select one:

a. More than seven years

b. 3.5 years

c. Less than seven years

d. Seven years

e. None of these

Solutions

Expert Solution

(d) Seven years

Because zero coupon bonds make no coupon payments, a zero coupon bond's duration will be equal to its maturity. The longer a bond's maturity, the longer its duration, because it takes more time to receive full payment.

Examples of zero-coupon bonds include US Treasury bills, US savings bonds, long-term zero-coupon bonds.

jeff jeffy answered 2 years ago

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