标题: Easy question but just not clicking intuitively.. [打印本页] 作者: edgeon 时间: 2013-4-3 22:39 标题: Easy question but just not clicking intuitively..
From Schweser:
What is the duration of a floating rate bond that has six years remaining to maturity and has semiannual coupon payments. Assume a flatterm structure of 6%. Which of the following is closest to the correct duration?
A) 4.850.
B) 0.500.
C) 6.000.
D) 12.000.
The correct answer was B) 0.500.
The duration of a floating rate bond is equal to the time until the next coupon payment takes place. As the coupon rate changes semiannually with the level of the interest rate, a floating rate bond has the same duration as a pure discount bond with time to maturity equal to the time to the next coupon payment of the floating rate bond.
Can anyone explain this more simply? I don’t think I’ve seen Schweser before label a floating rate bond’s duration as “the time until the next coupon payment takes place.” Thanks!
