Asked by Landon Womack on Jul 15, 2024

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Duration is a useful measure of interest rate risk because it incorporates a bond's default risk.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates, expressed in years.

Interest Rate Risk

The potential for investment losses due to fluctuations in interest rates, affecting the value of interest-bearing assets.

Default Risk

The possibility that a borrower will fail to meet the obligations of a debt agreement.

  • Absorb the information regarding the influencers on bond interest rate risk, focusing on the rate of coupon, length to maturity, and the distinct properties of bonds.
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Araseli FonsecaJul 20, 2024
Final Answer :
False
Explanation :
Duration measures a bond's sensitivity to changes in interest rates, not its default risk. Default risk is assessed separately, often through credit ratings.