A Bond Portfolio Containing a Large Portion of Zero-Coupon Bonds

question 30

True/False

A bond portfolio containing a large portion of zero-coupon bonds will be more favorably affected by declining interest rates than a bond portfolio containing no zero-coupon bonds. ​

---

Definitions:

Elastic Demand

A situation where the demand for a product or service significantly changes in response to price fluctuations, with greater sensitivity indicating higher elasticity.

Single Price

A market condition where a good or service is sold at the same price to all customers, regardless of purchase quantity or location.

Nondiscriminating Monopolist

A monopolist that charges the same price to all customers, as opposed to engaging in price discrimination where different prices are charged to different customers.

Natural Monopoly

A market condition where due to high fixed or startup costs, a single firm can supply a good or service to an entire market at a lower cost than multiple companies.