Assume That All Interest Rates in the Economy Decline from 10

question 33

Multiple Choice

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

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

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