Financial Derivatives: Bonds

Round 1: Investment Bank Quantitative Research

Question 1: What is duration (of a bond)?

Question 2: Rank the following four (4) bonds in order of their duration (or state what’s ambiguous otherwise):

• 6% coupon, 3 year
• 5.5% coupon, 3 year
• 3-year zero coupon
• 2-year zero coupon