Asked by Reylan Davis on May 21, 2024
Verified
Holding other factors constant, the interest-rate risk of a coupon bond is lower when the bond's
A) term to maturity is higher.
B) coupon rate is lower.
C) yield to maturity is higher.
D) term to maturity is higher and coupon rate is lower.
E) All of the options are correct.
Coupon Bond
A type of bond that pays the holder a fixed interest rate (coupon) over the bond's life, with the principal repaid at maturity.
Interest-Rate Risk
The risk that an investment's value will change due to a change in the absolute level of interest rates.
Coupon Rate
The annual interest rate paid on a bond, expressed as a percentage of the face value, representing the income investors will receive.
- Elucidate on the factors that play a role in determining bond duration and price volatility.
Verified Answer
Learning Objectives
- Elucidate on the factors that play a role in determining bond duration and price volatility.
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