Assume That All Interest Rates in the Economy Decline from 10

question 73

Multiple Choice

Assume that all interest rates in the economy decline from 10% to 9%.Which of the following bonds would have the largest percentage increase in price?

• A) A 1-year bond with a 15% coupon.
• B) A 3-year bond with a 10% coupon.
• C) A 10-year zero coupon bond.
• D) A 10-year bond with a 10% coupon.
• E) An 8-year bond with a 9% coupon.

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Definitions:

Independent

The state of being self-reliant or autonomous, not dependent on others for support or ideas.

Traditional

Pertaining to customs, practices, or methods that have been passed down through generations, often reflecting the historical aspects of a culture.

Committed Partnership

A relationship where individuals agree to be together and support each other in a long-term, dedicated manner.

Only Child

An individual who has no siblings and is the sole child of their parents, affecting their socialization and familial interactions.