Which of the Following Two Bonds Is More Price Sensitive

question 30

Multiple Choice

Which of the following two bonds is more price sensitive to changes in interest rates?
1) A par value bond,X,with a 5-year-to-maturity and a 10% coupon rate.
2) A zero-coupon bond,Y,with a 5-year-to-maturity and a 10% yield-to-maturity.

• A) Bond X because of the higher yield to maturity.
• B) Bond X because of the longer time to maturity.
• C) Bond Y because of the longer duration.
• D) Both have the same sensitivity because both have the same yield to maturity.
• E) None of these

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