Holding Other Factors Constant, Which One of the Following Bonds

question 49

Multiple Choice

Holding other factors constant, which one of the following bonds has the smallest price volatility?

• A)20-year, 0% coupon bond
• B)20-year, 6% coupon bond
• C)20 year, 7% coupon bond
• D)20-year, 9% coupon bond

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Definitions:

Intrinsic Value

The actual, underlying worth of an asset, investment, or company based on fundamental analysis without regard to its market value.

ROE

Return on Equity, a financial ratio indicating the profitability of a company relative to its shareholders' equity.

EPS

Earnings per share, a financial metric indicating the profitability of a company on a per-share basis.

Required Return

The minimum return a investor expects or needs from an investment, considering the risk involved.