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

question 33

Multiple Choice

Which of the following bonds will be most sensitive to a change in interest rates if all bonds have the same initial yield to maturity?

• A) a ten-year bond with a $1,000 face value whose coupon rate is 5.8% APR paid semiannually
• B) a ten-year bond with a $1,000 face value whose coupon rate is 7.4% APR paid semiannually
• C) a 20-year bond with a $1,000 face value whose coupon rate is 5.8% APR paid semiannually
• D) a 20-year bond with a $1,000 face value whose coupon rate is 7.4% APR paid semiannually

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Definitions:

Retroactive Interference

A psychological phenomenon where newer memories disrupt the recall of older ones.

Anterograde Interference

A cognitive phenomenon where new information interferes with the ability to recall older information.

Consolidation Problems

Difficulties in the process of stabilizing a memory trace after the initial acquisition.

Proactive Interference

The difficulty in learning new information because of the interfering effects of previously learned information.