A. maturity will be zero
B. maturity will be elastic
C. maturity will be higher
D. maturity will be lower
✅ The correct answer is option D.
In zero coupon bonds, impact of higher duration on maturity is that maturity will be lower. 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.
In zero coupon bonds, impact of higher duration on maturity is that maturity will be lower. 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.