Two Bonds Are Selling at Par Value, and Each Has

question 55

Multiple Choice

Two bonds are selling at par value, and each has 17 years to maturity. The first bond has a coupon rate of 6%, and the second bond has a coupon rate of 13%. Which of the following is true about the durations of these bonds?

• A) The duration of the higher coupon bond will be higher.
• B) The duration of the lower coupon bond will be higher.
• C) The duration of the higher coupon bond will equal the duration of the lower coupon bond.
• D) There is no consistent statement that can be made about the durations of the bonds.
• E) The bond's durations cannot be determined without knowing the prices of the bonds.

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