Which of the Following Bonds Will Be Least Sensitive to a Change

question 32

Multiple Choice

Which of the following bonds will be least sensitive to a change in interest rates?

• A) a ten-year bond with a $2,000 face value whose yield to maturity is 5.8% and coupon rate is 5.8% APR paid semiannually
• B) a 15-year bond with a $5,000 face value whose yield to maturity is 7.4% and coupon rate is 6.2% APR paid annually
• C) a 20-year bond with a $3,000 face value whose yield to maturity is 6.0% and coupon rate is 5.4% APR paid semiannually
• D) a 30-year bond with a $1,000 face value whose yield to maturity is 5.5% and coupon rate is 6.4% APR paid annually

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Definitions:

Military Spending

Financial allocations by a government for the maintenance and development of its armed forces and defense-related activities.

GNP

Gross National Product, the total value of goods and services produced by the residents of a country within a specific time period.

GDP

Gross Domestic Product, a measure of the total economic output of a country, representing the value of all goods and services produced over a specific time period.

Savings Rate

The savings rate is a measure of the proportion of disposable income that households save rather than spend on consumption.