Which of the Following Bonds Would Have the Greatest Percentage

question 21

Multiple Choice

Which of the following bonds would have the greatest percentage increase in value if all interest rates in the economy fall by 1%?

• A) 10-year,zero coupon bond.
• B) 20-year,10% coupon bond.
• C) 20-year,5% coupon bond.
• D) 1-year,10% coupon bond.
• E) 20-year,zero coupon bond.

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Definitions:

Switching Costs

Expenses that a consumer or company incurs as a result of changing from one product, service, supplier, or system to another.

Supplier Power

The level of control and influence that suppliers have over the price and availability of their products or services in the market.

Non-Critical Inputs

Components or materials that are not essential to the core function or operation of a product or process.

Homogenous Inputs

Inputs or resources that are identical in quality and nature, making them interchangeable in production processes.