One way to determine the volatility of a bond is to calculate its duration ...

By Investopedia Staff AAA
Q:
One way to determine the volatility of a bond is to calculate its duration. Duration takes into consideration all of the following EXCEPT:

A) Debt to equity ratio
B) Income generated by the coupons
C) Hedging strategies
D) Average maturity

A:
The correct answer is a):
Duration is the change in the value of a fixed income security that will result from a 1% change in interest rates. Duration takes into consideration the average maturity of the bonds in the portfolio, the income generated by the coupons, any option-writing income, and any hedging strategies that have been employed by that particular fund.

RELATED FAQS

  1. In the beginning of this year, the total par value of all CCC-rated bonds were $12 ...

    The correct answer is: d) (i) Default Loss Rate = [($1.3 billion - $625 million)/$1.3 billion] = 51.9% (ii) Dollar Default ...
  2. A manager wishes to construct a portfolio by investing 25% in a stock half as volatile ...

    The correct answer is: b) Step 1. Find Portfolio Beta Beta of the Portfolio = (.25)(.5)+(.25)(2)+(.25)(1)+(.25)(0) = 0.125 ...
  3. Which of the following statements least accurately describes the ways in which a ...

    The correct answer is: a) If the winning party simply terminates the swap, then he'll get zero for it. If a swap has value, ...
  4. Which of the following statements is (are) true with respect to the coefficient ...

    The correct answer is: c) (I) is incorrect because coefficient of determination will always be positive, whereas correlation ...
RELATED TERMS
  1. Series 79

    A examination to ensure a candidate is qualified to become a ...
  2. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  3. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  4. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  5. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
  6. Series 28

    An exam given by the Financial Industry Regulatory Authority ...

You May Also Like

Related Articles
  1. Insurance

    Municipal Bond Tips For The Series 7 ...

  2. Retirement

    6 Proven Tips For Series 6 Success

  3. Insurance

    Tips For Passing The Series 6 Exam

  4. Professionals

    Banker Or Broker: Which Career Is Right ...

  5. Professionals

    Breaking Down Financial Securities Licenses

Trading Center