In zero coupon bonds, increase in duration with respect to maturity must be at

A. decreasing rate

B. increasing rate

C. alarming rate

D. inelastic rate

Answer: Option A

Solution(By Examveda Team)

In zero coupon bonds, increase in duration with respect to maturity must be at decreasing rate. 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.