In zero coupon bonds, impact of lower duration on maturity is that

A. maturity will be higher

B. maturity will be lower

C. maturity will be zero

D. maturity will be elastic

Answer: Option A

Solution(By Examveda Team)

In zero coupon bonds, impact of lower duration on maturity is that maturity will be higher. A zero-coupon bond is a debt security instrument that does not pay interest. Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity. The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.