If Its Yield to Maturity Declined by 1%,which of the Following

question 62

Multiple Choice

If its yield to maturity declined by 1%,which of the following bonds would have the largest percentage increase in value?

• A) A 1-year zero coupon bond.
• B) A 1-year bond with an 8% coupon.
• C) A 10-year bond with an 8% coupon.
• D) A 10-year bond with a 12% coupon.
• E) A 10-year zero coupon bond.

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Definitions:

Random Variable

A variable whose values are determined by the numerical results of a random event.

Independent

Not influenced or controlled by others; in statistics, variables that are not affected by other variables in the model.

Weekly

Pertaining to something that occurs, is done, calculated, or issued every week.

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, indicating how much the values differ from the mean of the set.