The Duration of a Ten-Year,10 Percent Coupon Bond When the Interest

question 4

Multiple Choice

The duration of a ten-year,10 percent coupon bond when the interest rate is 10 percent is 6.76 years.What happens to the price of the bond if the interest rate falls to 8 percent?

• A) It rises 20 percent.
• B) It rises 12.3 percent.
• C) It falls 20 percent.
• D) It falls 12.3 percent.

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