Which of the Following Bonds Would Have the Greatest Percentage

question 71

Multiple Choice

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

• A) 20-year, 10% coupon bond.
• B) 20-year, 5% coupon bond.
• C) 1-year, 10% coupon bond.
• D) 20-year, zero coupon bond.
• E) 10-year, zero coupon bond.

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Definitions:

Operating Activities

Activities that relate directly to the primary business operations of a company, such as selling products or providing services.

Financing Activities

Transactions that involve raising capital for the business and repaying investors, such as issuing debt and equity or paying dividends.

Financing Activities

Actions that result in changes to the size and composition of the equity capital or borrowings of a company.

Cash Flows

Cash flows represent the movement of money into and out of a business, crucial for understanding liquidity, viability, and overall financial health.