Consider a Zero-Coupon Bond with 20 Years to Maturity

question 80

Multiple Choice

Consider a zero-coupon bond with 20 years to maturity.The percentage change in the price of the bond if its yield to maturity decreases from 7% to 5% is closest to:

• A)46%.
• B)17%.
• C)22%.
• D)38%.

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Definitions:

Elastic Demands

A situation where the demand for a good or service significantly changes in response to changes in its price.

Close Substitutes

Products or services that can easily replace each other in the eyes of the consumer, offering similar benefits and functionalities.

Inelastic

A term describing a situation in which the quantity demanded or supplied of a good or service is relatively unresponsive to changes in price.

Elastic

Describes a situation in which the demand for a good or service significantly changes in response to changes in price.