Multiple Choice
Which of the following two bonds is more price sensitive to changes in interest rates? 1) A par-value bond, A, with a 12 year to maturity and a 12% coupon rate.
2) A zero-coupon bond, B, with a 12 year to maturity and a 12% yield to maturity.
A) Bond A because of the higher yield to maturity
B) Bond A because of the longer time to maturity
C) Bond B 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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