Answer: the estimated change in the bond's full price in currency units for a given change in the annual yield to maturity.

## Explanation Money duration (also known as dollar duration) is defined as the estimated change in a bond's full price (in currency units) for a given change in the annual yield to maturity. Let's analyze each option: **Option A**: "the bond's Macaulay duration times the bond's full price." - This describes **modified duration**, not money duration. Modified duration = Macaulay duration / (1 + yield). Money duration is modified duration times the bond's full price. **Option B**: "the estimated change in the bond's full price in currency units for a given change in the annual yield to maturity." - This is the correct definition of money duration. It represents the price sensitivity in monetary terms. **Option C**: "one half of the difference in the bond's full prices given a 1 basis point decrease and 1 basis point increase in yield-to-maturity." - This describes **effective duration**, which measures the sensitivity of a bond's price to changes in interest rates, particularly for bonds with embedded options. ### Key Formulas: - **Money Duration** = Modified Duration × Full Price - **Modified Duration** = Macaulay Duration / (1 + Yield) - **Effective Duration** = (P_- - P_+) / (2 × P_0 × Δy) Money duration is particularly useful for portfolio managers who need to understand the actual dollar impact of interest rate changes on their bond holdings.

Author: LeetQuiz .