Question

How is duration defined in the context of assets and liabilities?

a.

Duration represents the present value of cash flows

b.

Duration is the average time until a fixed income security repays its principal

c.

Duration is the weighted average of the time until cash flows are received

d.

Duration is the rate of change of value of assets or liabilities with changes in interest rates

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (c).Duration is the weighted average of the time until cash flows are received Explanation:Duration is defined as the weighted average of the time until cash flows are received for assets or liabilities, where the weights are the present value of those cash flows.

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Q. How is duration defined in the context of assets and liabilities?
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