The Prices of Bonds with ____ Are Most Sensitive to Interest

question 13

Multiple Choice

The prices of bonds with ____ are most sensitive to interest rate movements.

• A) high coupon payments
• B) zero coupon payments
• C) small coupon payments
• D) none of the above (The size of the coupon payment does not affect the sensitivity of bond prices to interest rate movements.)

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Definitions:

Agency Relationship

A legal arrangement where one party, the agent, is authorized to act on behalf of another, the principal, in business transactions.

Establish A Partnership

The process of creating a partnership, which involves two or more individuals agree to share the profits and losses of a business endeavor.

Fiduciary Duty

A legal obligation requiring one party to act in the best interest of another when entrusted with care or responsibility for their property or welfare.

Breached

The act of breaking or failing to observe a law, agreement, or code of conduct.