Which of the Following Two Bonds Is More Price Sensitive

question 58

Multiple Choice

Which of the following two bonds is more price sensitive to changes in interest rates?
1) A par value bond,D,with a 2-year-to-maturity and a 8% coupon rate.
2) A zero-coupon bond,E,with a 2-year-to-maturity and a 8% yield-to-maturity.

• A)Bond D because of the higher yield to maturity.
• B)Bond E because of the longer duration.
• C)Bond D because of the longer time to maturity.
• D)Both have the same sensitivity because both have the same yield to maturity.
• E)None of the above.

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Definitions:

PERT Networks

Project management tools used to plan, schedule, and control complex projects, showcasing tasks as a network of nodes.

Longest Time

The maximum duration taken to complete a specific task or set of tasks within a project or process.

PERT Project

Program Evaluation and Review Technique, a project management tool used to plan, schedule, and control complex projects.

Expected Completion

An estimated time or date by which a project, task, or operation is predicted to be finished, taking into account various factors affecting its progress.