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Answer: A floating-rate bond tends to have a higher duration than a straight-coupon bond with an equivalent current yield
**Correct answer: D** A floating-rate bond generally has **low duration**, not higher duration, because its coupon resets periodically to market rates. Its duration is approximately the time until the next coupon reset/payment, and in practice is often close to zero. - **A** is true: the main classifications are straight-coupon, zero-coupon, and floating-rate bonds. - **B** is true: deferred-interest bonds and pay-in-kind bonds are variations on zero-coupon structures. - **C** is true: U.S. corporate bonds commonly use the **30/360** day count convention. - **D** is false: floating-rate bonds usually have **lower** duration than comparable straight-coupon bonds. Hence, the exception is **D**.
Author: Manit Arora
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Q-195.3. Each of the following is true about corporate bond interest payments EXCEPT:
A
The three main interest payment classifications of domestically issued corporate bonds are straight-coupon bonds (aka, fixed-rate), zero-coupon bonds, and floating-rate (aka, variable-rate) bonds
B
Two variations on the zero-coupon bond are deferred-interest bonds (DIB) and pay-in-kind (PIK) bonds
C
The day count convention (a.k.a.) day count basis for corporate bonds issued in the United States is 30/360
D
A floating-rate bond tends to have a higher duration than a straight-coupon bond with an equivalent current yield
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