Two Bonds Are Selling at Par Value, and Each Has

question 55

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.
• E) The bond's durations cannot be determined without knowing the prices of the bonds.

---

Definitions:

Certificate

A formal document attesting to a certain fact, such as the completion of an educational process or the ownership of a stock.

Secretary of State

An official in the federal and state governments who is responsible for keeping records, managing governmental documents, and often overseeing elections.

Consolidations

The process of combining two or more entities into one, in terms of financial statements, companies, or assets.

Joining of the Businesses

The joining of the businesses typically refers to the process where two or more companies come together to form a partnership, merger, or acquisition, combining resources for shared goals.