Which One of the Following Bonds Has the Greatest Interest

question 104

Multiple Choice

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

• A) 10-year, zero-coupon
• B) 10-year, 8% coupon
• C) 20-year, zero-coupon
• D) 20-year, 4% coupon
• E) 20-year, 8% coupon

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Definitions:

Neoclassical Models

Economic models based on the principles of neoclassical economics that emphasize rational behavior, supply and demand equilibrium, and the efficiency of markets.

Behavioral Economics

A field of economics that studies how psychological, cognitive, emotional, cultural, and social factors affect the economic decisions of individuals and institutions.

Nudges

Subtle policy or design changes aimed at influencing people's behavior in predictable ways without restricting their choices.

Heuristics

Simple, efficient rules or methods used to make judgments and decisions based on limited information, often leading to satisfactory but not always optimal solutions.