An Asset's Maturity Is a Factor That Affects Its Price

question 6

Essay

An asset's maturity is a factor that affects its price sensitivity to a change in yield. In fact, a bond's price sensitivity to a change in the discount rate is positively related to the bond's maturity. Consider the case of two bonds that have the same coupon rate, and the same required yield but different maturities. If the required rate were to change, the price sensitivity of the bond with the longer maturity would be greater than that of the bond with the shorter maturity. Give an illustration of this.

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Definitions:

Instrumentality

The perceived relationship between performance and the attainment of certain outcomes, in the context of motivation theories.

Job Satisfaction

The level of contentment individuals feel regarding their job, including aspects like work environment, compensation, and the nature of the work itself.

Good Performance

The achievement of tasks or goals at a level that meets or exceeds expectations.

Rewarded

Receiving something of value in recognition of service, effort, or achievement.