Two Bonds Are Selling at Par Value, and Each Has

question 59

Multiple Choice

Two bonds are selling at par value, and each has 17 years to maturity.The first bond has a coupon rate of 6%, and the second bond has a coupon rate of 13%.Which of the following is true about the durations of these bonds?

• A)The duration of the higher coupon bond will be higher.
• B)The duration of the lower coupon bond will be higher.
• C)The duration of the higher coupon bond will equal the duration of the lower coupon bond.
• D)There is no consistent statement that can be made about the durations of the bonds.

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Definitions:

Fiduciary Standard

The fiduciary standard is a legal and ethical requirement for certain financial advisors to act in the best interest of their clients, putting the clients' interests ahead of their own.

Investment Advisors

Professionals who provide financial advice or investment management services to clients, based on their financial situation and goals.

Clients' Interests

The priorities and goals that are in the best financial or professional benefit of a client, often emphasized in advisory roles.

Suitability

The requirement that investment choices made by a financial advisor or broker must be appropriate for the client, taking into consideration the client's financial situation, objectives, and risk tolerance.