Which of the Following Bonds Has the Greatest Interest Rate

question 1

Multiple Choice

Which of the following bonds has the greatest interest rate price risk?

• A) A 10-year $100 annuity.
• B) A 10-year, $1,000 face value, zero coupon bond.
• C) A 10-year, $1,000 face value, 10% coupon bond with annual interest payments.
• D) All 10-year bonds have the same price risk since they have the same maturity.
• E) A 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.

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Definitions:

Weekly Operating Profits

Weekly operating profits describe the earnings a business generates from its normal operations over a one-week period, excluding any income from investments or other non-operational sources.

Short Run

An interval in economic studies where a minimum of one production element remains constant and is unalterable.

Variable Costs

Expenses that change in proportion to the activity of a business.

Short Run

A time period in economics during which at least one input, such as plant size, is fixed and cannot be altered.