Which of the Following Bonds Will Have the Largest Percentage

question 77

Multiple Choice

Which of the following bonds will have the largest percentage increase in value if interest rates decrease by 1 percent?

• A) 2-year, 5 percent coupon bond
• B) 30-year, 10 percent coupon bond
• C) 10-year, zero-coupon
• D) 30-year, zero-coupon

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Definitions:

Elasticity

A measure of the responsiveness of quantity demanded or supplied to a change in one of its determinants, such as price or income.

Consumer Expenditure

The total amount spent by consumers on goods and services within a specific period.

Demand Curves

illustrate the relationship between the price of a good and the quantity demanded, typically showing a downward slope indicating that demand decreases as price increases.

Price Decrease

A reduction in the cost at which a good or service is sold, often aimed at increasing demand or sales volume.