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:

Mining

The extraction of valuable minerals or other geological materials from the Earth.

Salt Deposits

Natural accumulations of crystalline salt formations, often found in underground beds or dried lake beds, extracted for various uses including consumption.

Canadian Prairies

A vast geographical region in Western Canada characterized by its flat landscape and predominantly agricultural use, including the provinces of Alberta, Saskatchewan, and Manitoba.

Maritimes

Regions near or relating to the sea, often characterized by their maritime culture, economy, and ecosystem.