Which of the Following Bonds Will Be Most Sensitive to Changes

question 39

Multiple Choice

Which of the following bonds will be most sensitive to changes in market interest rates?

• A) A bond with an 8 percent semiannual coupon and 8 years to maturity
• B) A bond with a 6 percent semiannual coupon and 8 years to maturity
• C) A bond with an 8 percent semiannual coupon and 6 years to maturity
• D) A bond with a 6 percent semiannual coupon and 6 years to maturity

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Definitions:

Gold Suites

Luxury hotel accommodations that offer enhanced amenities, services, and possibly gold-themed decor to guests.

Price/Demand Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, often used to gauge the sensitivity of demand to price changes.

Projected Revenue

An estimate of the amount of money that an organization is expected to generate in a future period.

Lagrange Multiplier

A method used in mathematical optimization to find the maxima or minima of a function subject to constraints.