Which Bond Is More Sensitive to an Interest Rate Change

question 48

Multiple Choice

Which bond is more sensitive to an interest rate change of 0.75%?
Bond A: YTM = 4.00%,maturity = 8 years,coupon = 6% or $60,par value = $1,000.
Bond B: YTM = 3.50%,maturity = 5 years,coupon = 7% or $70,par value = $1,000.

• A)bond A
• B)bond B
• C)both are equally sensitive
• D)cannot be determined

---

Definitions:

Dysthymia

A persistent, mild depression lasting for a long period, often years.

Mild Bipolar Disorder

A less severe form of bipolar disorder characterized by less extreme mood swings between depression and mania.

Paranoia

A mental condition characterized by delusions of persecution, unwarranted jealousy, or exaggerated self-importance.

Eating Disorder

A mental disorder that features severe disturbances in eating behavior.