All else held equal, the duration of bonds selling at higher yields compared to bonds selling at lower yields will be: A) greater. B) equal. C) cannot be determined with the information given. D) lower.
D
D
duration = slope of tangent higher yield = more flat = lower duration
good job guys - are you all just memorizing this or is there some sort of intuition behind this (besides thinking about the curves)
lower maturity-lower duration higher coupons- lower duration add an option (call or put)- lower duration higher market yields- lower duration thats what I remember
vbcfa Wrote: ------------------------------------------------------- > good job guys - are you all just memorizing this > or is there some sort of intuition behind this > (besides thinking about the curves) a little of both. I know from a class I took that lower yield = higher duration b/c lower yield places the bond at a greater sensitivity to rate shocks. This question just asks the opposite higher yield = lower duration.
vbcfa Wrote: ------------------------------------------------------- > good job guys - are you all just memorizing this > or is there some sort of intuition behind this > (besides thinking about the curves) well the curve is defined by the properties of the bond, not the other way around so i would say for me the curve is the best way to remember the many relationships inherent to bonds
Higher yield = lower duration Higher coupon = lower duration (think zero coupon bond) Shorter maturity = lower duration On the flip side… Higher coupon = greater reinvestment risk Longer maturity = greater reinvestment risk
Also reinvestment risk and price risk are inveresly related 
Memorization, I didn’t want to think about the logic behind this one this time.
Forced myself to think about the logic to retain it better.
yeah, better to internalize most of the cfa concepts or I’d would be very clueless on the exam day. Let’ me post another question of my own making, Compare two government bonds with same maturities but different yields and coupons. UK bonds have lower yields and higher coupons than US bonds. Which of the following is MOST accurate for UK bonds in relation to US bonds. duration, yield volatility a) high, high b) low, low c) low, high d) high, low d) can not be determined, can not be determined
Cannot determine. Need to know the actual values of the yields and coupons and do a quick duration calculation to see which values has the greater impact… and you’d need to know the maturity then, as a result.