Which Bond Is More Sensitive to an Interest Rate Change

question 5

Multiple Choice

Which bond is more sensitive to an interest rate change of 0.75 percent?
Bond A: YTM = 4.00%, maturity = 8 years, coupon = 6% or $60, par value = $1,000.
Bond B: YTM = 3.50%, maturity = 5 years, coupon = 7% or $70, par value = $1,000.

• A)Bond A
• B)Bond B
• C)Both are equally sensitive.
• D)Cannot be determined

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