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      Question

      The duration of a bond is a measure of

      its:
      A Credit risk Correct Answer Incorrect Answer
      B Interest rate sensitivity Correct Answer Incorrect Answer
      C Liquidity Correct Answer Incorrect Answer
      D Tax status Correct Answer Incorrect Answer

      Solution

      Bond duration measures the sensitivity of a bond's price to changes in interest rates. It is expressed in years and indicates the weighted average time to receive the bond's cash flows.

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