What are three determinants of bond duration? Which one of the three changes after a bond issue?

Interview Question: What are three determinants of bond duration? Which one of the three changes after a bond issue?

Answer:

1) Maturity effect – A bond with a lower maturity has a lower duration.

2) Coupon effect – A bond with a higher coupon has a lower duration.

3) Yield effect – A bond with a higher yield has a lower duration. The yield effect changes after a bond issue as the bond yield fluctuates.

Back to “Sample Interview Questions”