Understanding Bond Duration

Medium Fixed Income Valuation Duration And Convexity

A bond with a face value of $1,000 and a coupon rate of 6% pays interest semi-annually. It has a maturity of 5 years and its yield to maturity (YTM) is currently 4%. You are interested in assessing the bond's exposure to interest rate changes, particularly its duration and convexity.

Given this information, which of the following statements about the bond's duration is correct?

The bond's duration is less than its 5-year maturity.

The bond's duration will be exactly 5 years, since it is a fixed coupon bond.

The bond's duration is more than its coupon rate due to its YTM being lower than the coupon rate.

Hint

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