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:

City Deterioration

Refers to the process where a part of the city falls into disrepair and decline, often characterized by abandoned buildings, decreased public services, and increased crime.

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An encouragement or reward designed to prompt individuals or organizations to keep equipment or property in good condition.

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Government-imposed limitations on the prices that can be charged for goods and services in a market, typically to curb inflation or ensure basic goods' affordability.

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The expense incurred by not choosing the next most favorable option when a decision is made or one possibility is selected over another.