Which of the Following Set of Conditions Will Result in a Bond

question 14

Multiple Choice

Which of the following set of conditions will result in a bond with the greatest price volatility?

• A) a high coupon and a short maturity
• B) a high coupon and a long maturity
• C) a low coupon and a short maturity
• D) a low coupon and a long maturity

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Definitions:

Laspeyres Price Index

An index used to measure the change in the cost of purchasing a fixed basket of goods and services over time, using the prices from the base period as weights.

Base Year

A specific year against which economic or financial data is compared, often used to calculate indices or real growth rates.

Current Year

The ongoing year according to the Gregorian calendar, continuously updating as time progresses.

Paasche Price Index

A price index that measures the price changes between the current and base period by using the current period quantities as weights.