An 8-Year Treasury Bond Has a 10% Coupon, and a 10-Year

question 56

Multiple Choice

An 8-year Treasury bond has a 10% coupon, and a 10-year Treasury bond has an 8% coupon.Both bonds have the same yield to maturity.If the yield to maturity of both bonds increases by the same amount, which of the following statements would be CORRECT?

• A) Both bonds would decline in price, but the 10-year bond would have the greater percentage decline in price.
• B) The prices of both bonds would increase by the same amount.
• C) One bond's price would increase, while the other bond's price would decrease.
• D) The prices of the two bonds would remain constant.
• E) The prices of both bonds will decrease by the same amount.

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