Multiple Choice
Which of the following two bonds is more price sensitive to changes in interest rates? 1) A par value bond, X, with a 5-year year to maturity and a 10% coupon rate.
2) A zero-coupon bond, Y, with a 5-year year to maturity and a 10% yield to maturity.
A) Bond X because of the higher yield to maturity
B) Bond X because of the longer time to maturity
C) Bond Y because of the longer duration
D) Both have the same sensitivity because both have the same yield to maturity.
E) None of the options are correct.
Correct Answer:
Verified
Correct Answer:
Verified
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