Consider Two Recent Bond Issues by Microsoft: Both Have Face

question 76

Multiple Choice

Consider two recent bond issues by Microsoft: both have face values of $1,000 and coupon rates of 10% but one bond (call it the short bond) has five years to maturity and the other,the long bond,has twenty years to maturity.Which bond do you expect to be more sensitive to a change in yields? That is,for a given change in yield which bond (the long or the short) will experience a greater change in price?

• A) The long bond
• B) They are equally sensitive.
• C) The short bond

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Definitions:

Synaptogenesis

The formation of synapses between neurons in the brain, a critical process in the development of neural networks and learning.

Habituate

To become accustomed to something through repeated exposure or experience.

Learning Language

The process by which individuals acquire the ability to perceive, produce, and use words to understand and communicate with others.

Experience-dependent Development

The process by which individual experiences, such as learning, directly influence and shape the development of neural connections and behavior.