Which of the Following Statements Best Describes Interest Rates

question 111

Multiple Choice

Which of the following statements best describes interest rates?

• A) You hold two bonds. One is a 10-year, zero coupon, issue and the other is a 10-year bond that pays a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate rises from the current level, the zero coupon bond will experience the LARGER percentage decline.
• B) The time to maturity does not affect the change in the value of a bond in response to a given change in interest rates.
• C) The shorter the time to maturity, the greater the change in the value of a bond in response to a given change in interest rates.
• D) The longer the time to maturity, the smaller the change in the value of a bond in response to a given change in interest rates.

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