How does investment duration affect returns?

A. There is no relationship whatsoever

B. With greater duration of investment returns are larger

C. If the duration is larger the rate of returns is likely to be smaller

D. With greater duration of investment larger tax possibility is likely

Answer: Option B

Solution(By Examveda Team)

investment duration affect returns with greater duration of investment returns are larger. Generally, the higher the duration of a bond or a bond fund (meaning the longer you need to wait for the payment of coupons and return of principal), the more its price will drop as interest rates rise.