Which Bond Would Have the Greatest Percentage Increase in Value

question 79

Multiple Choice

Which bond would have the greatest percentage increase in value if all interest rates fall by 1%?

• A)10-year, zero coupon bond
• B)20-year, 10% coupon bond
• C)20-year, 5% coupon bond
• D)20-year, zero coupon bond

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Definitions:

Private Consumptions

Expenditure by households and individuals on goods and services for personal use, excluding purchases by businesses or government.

Pareto Optimal

A resource distribution paradigm where it's unattainable to ameliorate the situation of one individual without diminishing that of another.

Utility Functions

Representations of an individual's preference ordering over a set of goods or outcomes, quantifying the satisfaction obtained from each.

Private Goods Consumption

The act of consuming goods that are excludable and rivalrous in nature, implying that one individual's consumption of the good prevents others from consuming the same unit of the good.