Consider a Bond Portfolio Manager Who Expects Interest Rates to Decline

question 84

Multiple Choice

Consider a bond portfolio manager who expects interest rates to decline and has to choose between the following two bonds.
Bond A: 10 years to maturity,5% coupon,5% yield to maturity
Bond B: 10 years to maturity,3% coupon,4% yield to maturity

• A) Bond A because it has a higher coupon rate.
• B) Bond A because it has a higher yield to maturity.
• C) Bond B because it has a lower coupon rate.
• D) Bond A or Bond B because the maturities are the same.
• E) None of the above.

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Definitions:

Volatile Memory

Memory that requires power to maintain the stored information, losing all stored data when the system's power is turned off, like RAM.

Random Access Memory (RAM)

A type of computer memory that can be accessed randomly, used for storing operating data and machine code currently in use.

Read-Only Memory (ROM)

A type of non-volatile memory used in computers and electronic devices, storing data permanently and typically containing the system's firmware.

Swap File

A file on a hard disk used as a temporary storage area for data that cannot be held in the main system memory.