Which one of the following bonds would be likely to exhibit a greater degree of interest...
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Which one of the following bonds would be likely to exhibit a greater degree of interest rate risk?
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A zero-coupon bond with 20 years until maturity
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A coupon-paying bond with 20 years until maturity
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A floating-rate bond with 20 years until maturity
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A zero-coupon bond with 30 years until maturity
Homework Answers
A zero-coupon bond with 30 years until maturity
A bond with the highest time to maturity and lowest coupon rate will have the highest interest rate risk. Here, zero coupon bond does not pay any coupon thererfore it has a coupon rate of 0%. It has also the highest time to maturity.
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