Assume That All Interest Rates in the Economy Decline from 10

question 78

Multiple Choice

Assume that all interest rates in the economy decline from 10% to 9%.Which of the following bonds would have the largest percentage increase in price?

• A) An 8-year bond with a 9% coupon.
• B) A 1-year bond with a 15% coupon.
• C) A 3-year bond with a 10% coupon.
• D) A 10-year zero coupon bond.
• E) A 10-year bond with a 10% coupon.

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Definitions:

Personal-Document Technique

A research method where personal documents like letters, diaries, or autobiographies are analyzed to gather data.

Academic Community

A group of scholars, teachers, and learners associated with an educational institution engaging in intellectual pursuits.

Pessimistic View

An inclination to perceive the most negative side of situations or to expect the worst outcome; a deficiency in optimism or faith in what is to come.

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The pattern of thoughts, feelings, and behaviors that define an individual in adulthood.