Which of the Following Two Bonds Is More Price Sensitive

question 55

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 the options

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Definitions:

Lower-Middle Class

A social class positioned below the upper-middle class, typically comprised of semi-professionals, skilled craftsmen, and lower-level management.

Red Shirts

Volunteers who followed the Italian patriot and general Giuseppe Garibaldi during his campaigns for the unification of Italy in the 19th century.

Giuseppe Garibaldi

An Italian general, patriot, and nationalist who played a key role in the unification of Italy, known for his leadership in the campaign and battles that consolidated different states of the Italian Peninsula into a single nation.

Piedmont-Sardinian Army

The military forces of the Kingdom of Piedmont-Sardinia, pivotal in the unification of Italy in the 19th century.