A 10-Year Treasury Bond Has an 8% Coupon,and an 8-Year

question 39

Multiple Choice

A 10-year Treasury bond has an 8% coupon,and an 8-year Treasury bond has a 10% coupon.Neither is callable,and both have the same yield to maturity.If the yield to maturity of both bonds increases by the same amount,which of the following statements would be CORRECT?

• A) The prices of both bonds will decrease by the same amount.
• B) Both bonds would decline in price,but the 10-year bond would have the greater percentage decline in price.
• C) The prices of both bonds would increase by the same amount.
• D) One bond's price would increase,while the other bond's price would decrease.
• E) The prices of the two bonds would remain constant.

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Definitions:

ULPA

Stands for Uniform Limited Partnership Act, which is a statute that standardizes the laws governing limited partnerships in certain jurisdictions.

Limited Partnership

A business structure where one or more partners have limited liabilities, and at least one partner has unlimited liability.

Long-term Businesses

Companies or enterprises engaged in operations with the aim or expectation of continuing for many years into the future.

LLLP

A limited liability limited partnership, a type of partnership where some partners have limited liability (similar to limited partners in an LP) while also having the ability to participate in management.