Key Rate Duration

Key rate duration is _most appropriate_ for estimating the sensitivity of a bond's price to a:

Incorrect. Macaulay duration or modified duration would be most appropriate for measuring the sensitivity of a bond's price to changes in its own yield.

Incorrect. Effective duration would be most appropriate for measuring the sensitivity of a bond's price to a small, parallel shift in a benchmark yield curve.

That's right! Key rate duration is most appropriate for measuring the sensitivity of a bond's price to changes in the shape of a benchmark yield curve, such as becoming flatter or steeper.

change in its own yield to maturity.

small, parallel shift in a benchmark yield curve.

change in the shape of a benchmark yield curve.