Which of the Following Bonds Will Be Most Sensitive to a Change

question 10

Multiple Choice

Which of the following bonds will be most sensitive to a change in interest rates if all bonds have the same initial yield to maturity?

• A) a ten-year bond with a $1000 face value whose coupon rate is 5.8% APR paid semiannually
• B) a 20-year bond with a $1000 face value whose coupon rate is 7.4% APR paid semiannually
• C) a 20-year bond with a $1000 face value whose coupon rate is 5.8% APR paid semiannually
• D) a ten-year bond with a $1000 face value whose coupon rate is 7.4% APR paid semiannually

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Definitions:

Implied Warranty

Is an assurance automatically applied by law, suggesting that a product is fit for its intended purpose and meets a basic level of quality.

Breach of Warranty

Violation of the terms of a warranty agreement, where the goods or services provided fail to meet the standards or conditions promised.

Proximately Caused

An event sufficiently related to a legally recognizable injury to be considered the cause of that injury.

Breach of Warranty

A violation of the terms of a guarantee provided in a sales contract, where a product fails to meet the stated quality or standards.