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Answer: d) 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 usually has **lower**, not higher, duration than a straight-coupon bond with a comparable yield, because its coupon resets periodically to market rates. Why the others are true: - **A**: Correct — fixed-rate, zero-coupon, and floating-rate bonds are the main interest payment classifications. - **B**: Correct — deferred-interest bonds and pay-in-kind bonds are variations of zero-coupon structures. - **C**: Correct — U.S. corporate bonds commonly use the **30/360** day count convention. So the false statement is **D**.
Author: Manit Arora
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A
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
b) Two variations on the zero-coupon bond are deferred-interest bonds (DIB) and pay-in-kind (PIK) bonds
C
c) The day count convention (a.k.a.) day count basis for corporate bonds issued in the United States is 30/360
D
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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