Which of the following bonds will have higher price sensitivity to interest rate (i.e. higher interest...
Which of the following bonds will have higher price sensitivity to interest rate (i.e. higher interest rate risk)?
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5 years to maturity, 10% coupon bonds |
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30 years to maturity, 10% coupon bonds |
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30 years to maturity, 3% coupon bonds |
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5 years to maturity, 3% coupon bonds |
Homework Answers
Bonds with the lowest coupon rate and highest years to maturity are more sensitive to changes in yield, whereas bonds with least years to maturity plus highest bond coupon rates are least sensitive, thus the answer is:-
c) 30 years to maturity, 3% coupon bonds
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