When interest rates increase, the duration of a 20-year bond selling at a premium ________.

A) increases
B) decreases
C) remains the same
D) increases at first and then declines

Interest Rates

Interest rates are the cost of borrowing money expressed as a percentage of the total amount loaned, influencing economic activity by affecting spending and saving behaviors.

Premium

The amount paid for an insurance policy, or the extra cost for financial instruments or securities about their nominal or face value.

Duration

A measurement of the sensitivity of the price of a bond or other debt investment to changes in interest rates, typically expressed in years.