The Bonds That Are Most Sensitive to Interest Rate Movements

question 33

Multiple Choice

The bonds that are most sensitive to interest rate movements have

• A)no coupon and a short-term maturity.
• B)high coupons and a short-term maturity.
• C)high coupons and a long-term maturity.
• D)no coupon and a long-term maturity.

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Definitions:

Held-to-maturity Securities

Debt securities that an investor intends to hold until a fixed maturity date.

Debt Securities

Financial instruments that represent a loan made by an investor to a borrower, typically including terms for interest payments and the return of principal at maturity.

Fixed Maturity

A term related to fixed-income investments indicating the set date when the principal amount of the investment is paid back to the investor.

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks, which provide shareholders with claims on assets and earnings.