True or false? Explain. (a) Longer-maturity bonds necessarily have longer duration. (b) The longer a...
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True or false? Explain. (a) Longer-maturity bonds necessarily have longer duration. (b) The longer a bond's duration, the lower its volatility? (c) Other things equal, the lower the bond coupon, the higher its volatility? (d) If interest rates rise, bond durations also rise? Question 2: Calculate the durations and volatilities (modified durations) of securities A, B, and C. Their cash flows are shown below. The interest rate is 8%
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