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

question 9

Multiple Choice

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

• A)a ten-year bond with a $2000 face value whose yield to maturity is 5.8% and coupon rate is 5.8% APR paid semi-annually
• B)a 15-year bond with a $5000 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 $3000 face value whose yield to maturity is 6.0% and coupon rate is 5.4% APR paid semi-annually
• D)a 30-year bond with a $1000 face value whose yield to maturity is 5.5% and coupon rate is 6.4% APR paid annually
• E)a 25-year bond with $4000 face value whose yield to maturity is 6.2% and coupon rate is 5.6% APR paid annually

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Definitions:

Correlations

Statistical measures that describe the extent to which two variables change together, but not necessarily indicating causation.

Objective Test

An assessment tool designed to measure knowledge, skills, or abilities without subjective judgment.

Criterion-related Validity

The extent to which a measure is related to an outcome, where the validity is determined by comparing the measure against a known criterion or benchmark.

Construct Validity

The extent to which a test or instrument accurately measures the theoretical construct it is intended to assess.