If the Yield to Maturity Decreased 1 Percentage Point, Which

question 87

Multiple Choice

If the yield to maturity decreased 1 percentage point, which of the following bonds would have the largest percentage increase in value?

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

---

Definitions:

Quantity Demanded

The complete volume of a good or service that individuals intend to acquire at a predetermined price within a set period.

Shortage

A situation in which the demand for a good or service exceeds its supply in a market.

Surplus

An excess of income or assets over expenditure or liabilities in a given period, indicating financial health.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product or service, typically used to control costs for essential items like food and rent.