Which statement about bond duration is correct?

Which statement about bond duration is correct?

• A. The duration of a zero-coupon bond is always greater than its time to maturity.
• B. The duration of a zero-coupon bond is always equal to its time to maturity.
• C. The duration of a coupon bond is always equal to its time to maturity.
• D. The duration of a zero-coupon bond is always less than its time to maturity.

Answer: (B)

Duration is the weighted average time to receive a bond’s cash flows, with weights based on the present value of each payment. For a zero-coupon bond, there are no intermediate cash flows—only the single payment at the maturity date. That means the entire weight sits on that one date, so the Macaulay duration equals the time to maturity. In other words, a zero-coupon bond’s duration matches how long you must wait to get your money. For a coupon bond, coupon payments occur before maturity, pulling the weighted average of cash flows earlier, so its duration is typically shorter than its maturity. That’s why the statement about a zero-coupon bond having duration equal to its time to maturity is the correct one, and it’s not true that the duration would be greater or less than maturity for zero-coupon bonds.

Duration is the weighted average time to receive a bond’s cash flows, with weights based on the present value of each payment. For a zero-coupon bond, there are no intermediate cash flows—only the single payment at the maturity date. That means the entire weight sits on that one date, so the Macaulay duration equals the time to maturity. In other words, a zero-coupon bond’s duration matches how long you must wait to get your money.

For a coupon bond, coupon payments occur before maturity, pulling the weighted average of cash flows earlier, so its duration is typically shorter than its maturity. That’s why the statement about a zero-coupon bond having duration equal to its time to maturity is the correct one, and it’s not true that the duration would be greater or less than maturity for zero-coupon bonds.