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      Question

      The average time until the cash flows on the bond is

      received:
      A Convexity Correct Answer Incorrect Answer
      B Duration Correct Answer Incorrect Answer
      C Option Correct Answer Incorrect Answer
      D Yield to maturity Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      The duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price with respect to yield, or the percentage change in price for a parallel shift in yields.

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