Which One of the Following Bonds Is the Least Sensitive

question 29

Multiple Choice

Which one of the following bonds is the least sensitive to interest rate risk?

• A) 3-year; 4 percent coupon
• B) 3-year; 6 percent coupon
• C) 5-year; 6 percent coupon
• D) 7-year; 6 percent coupon
• E) 7-year; 4 percent coupon

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Definitions:

Sales Commissions

A portion of sales revenue paid to sales employees as a reward for selling the company's products or services.

Net Operating Income

Earnings before interest and taxes (EBIT), representing the profit from normal business operations.

Fixed Expenses

Expenses that remain constant regardless of production or sales volumes, including items like rent, salaries, and insurance fees.

Selling Price

The amount a company charges for its product or service, set to cover costs and generate a profit.