Consider Two Recent Bond Issues by Microsoft: Both Have Face

question 1

Multiple Choice

Consider two recent bond issues by Microsoft: both have face values of $1,000 and coupon rates of 10% but one bond (call it the short bond) has five years to maturity and the other,the long bond,has twenty years to maturity.Assume that yields fall from 15% to 5%.Which bond will experience a greater price increase,and by how much?

• A) Long bonds by $384
• B) Short bonds by $384
• C) The change in price is equal for both bonds
• D) Long bonds by $936
• E) Short bonds by $936

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Definitions:

Other Models

A term that refers to alternative theories, frameworks, or systems used to explain or understand phenomena, distinct from the most widely acknowledged or mainstream models.

Neuroticism Dimension

An individual's disposition distinguished by susceptibility to nervousness, fright, whims in temperament, uneasiness, longing for what others have, irritability, resentment, and isolation.

Big Five

A model describing human personality as comprising five broad dimensions: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

Core Personality Dimensions

Fundamental attributes that describe an individual’s personality, often considered stable and encompassing a range of behaviors.