Which of the Following Bonds Will Be Most Sensitive to Changes

question 39

Multiple Choice

Which of the following bonds will be most sensitive to changes in market interest rates?

• A) A bond with an 8 percent semiannual coupon and 8 years to maturity
• B) A bond with a 6 percent semiannual coupon and 8 years to maturity
• C) A bond with an 8 percent semiannual coupon and 6 years to maturity
• D) A bond with a 6 percent semiannual coupon and 6 years to maturity

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Definitions:

Money Income

The total amount of monetary earnings received by an individual or household, including wages, salaries, benefits, and other income sources.

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, reflecting their preferences for combinations of goods.

Utility

A measure of satisfaction or benefit that consumers receive from consuming goods and services.

Equilibrium Position

The state in which market supply and demand balance each other, resulting in stable prices and quantities.