If Interest Rates Fall from 8 Percent to 7 Percent

question 99

Multiple Choice

If interest rates fall from 8 percent to 7 percent, which of the following bonds will have the largest percentage increase in its value?

• A) A 10-year zero coupon bond.
• B) A 10-year bond with a 10 percent semiannual coupon.
• C) A 10-year bond with a 10 percent annual coupon.
• D) A 5-year zero coupon bond.
• E) A 5-year bond with a 12 percent annual coupon.

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Definitions:

Experiment

A research method involving the manipulation of one variable to determine its effect on another variable, under controlled conditions.

Headache

A pain or discomfort in the head, scalp, or neck, often associated with tension, migraine, or other health issues.

Independent Variable

The variable that is manipulated by the researcher to observe its effect on the dependent variable.

Loudness

A subjective perception of the intensity of sound, often measured in decibels, that impacts how sound is experienced.