Question about a non-intuitive comparative durations?
I came across this question recently and was wondering how to justify the answer:
Which has the higher Macaulay duration: 10yr zero coupon OR 6% (semiannual) 30yr?
I was a bit confused, as I figured that the 10yr has Dur 10 and the 30yr would differ based on the yield? Please help!
You're correct. If yields are at current values (thinking the 30 year is a t bond) then the 30 year will definitely have higher macaulay duration. If the 30 year is at par, the durations would be close though I would guess the 30 year to still have a higher one.
My professor's answer was the 30yr, but the question provided exactly this much information. In the case that yields were, say, 50% or 100% or some very large number, then wouldn't it be so the that the 30 yr have considerably lower Macaulay duration?
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