Holding Other Factors Constant, Which One of the Following Bonds

question 22

Multiple Choice

Holding other factors constant, which one of the following bonds has the smallest price volatility?

• A) 20-year, 0% coupon bond
• B) 20-year, 6% coupon bond
• C) 20 year, 7% coupon bond
• D) 20-year, 9% coupon bond
• E) Cannot tell from the information given

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Definitions:

Reciprocity Principle

A social norm suggesting that people should return the kind of behavior they receive from others, like kindness for kindness.

Bargaining

A negotiation process between two or more parties aimed at reaching a mutually acceptable agreement.

Obligation

A duty or commitment one is bound to by law, promise, or moral responsibility.

Social Loafing

A pattern in which people working together on a task generate less total effort than they would have if they had each worked alone.