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CFA Level I · CFA Level I Exam · Yield-Based Bond Convexity and Portfolio Properties

Money duration of a bond position is best described as:

Money duration is the annual modified duration multiplied by the full market value of the bond position, including accrued interest. It measures the currency amount of price change for a 1% change in yield, unlike modified duration, which is expressed in percentage terms.

  1. Athe modified duration divided by the full price of the bond
  2. Bthe percentage price change for a 1% change in yield
  3. Cthe modified duration multiplied by the full market value of the positionCorrect

Explanation

Money duration equals annual modified duration times the full position value (price plus accrued interest). It expresses the price change in currency terms per 100 bps change in yield. The percentage price change for a 1% yield change is the modified duration itself, not money duration.

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