A Set of Bonds All Have the Same Maturity

question 18

Multiple Choice

A set of bonds all have the same maturity. Which one has the least percentage price changes for given shifts in interest rates:

• A) zero coupon bonds.
• B) high coupon bonds.
• C) low coupon bonds.
• D) pure discount bonds.

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Definitions:

Missing Interest Rate

The interest rate that is not known or provided in a financial scenario, which is necessary to solve related problems.

Equivalent Interest Rate

An interest rate that, when considering compounding and other factors, is effectively equal to a comparative rate.

Missing Interest Rate

The interest rate that is not specified or needs to be determined in a financial equation or scenario.

Equivalent Interest Rate

A rate that reflects the actual annual cost of a loan or the earnings on an investment, taking into account the effect of compounding.