What Is the Percentage Change in a 10-Year Zero-Coupon Bond

question 72

Multiple Choice

What is the percentage change in a 10-year zero-coupon bond with a duration of 10 years,when interest rates increase from 3% to 4%?

• A)-9.2%
• B)-10%
• C)-9.8%
• D)-10.4%
• E)-8.7%

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Definitions:

Interest Revenue

Earnings received from investments in various financial instruments, including savings accounts, bonds, and loans, where interest is paid to the investor.

Advance

A payment made beforehand, often as part of a contractual agreement or as a loan that expects repayment under specific terms.

Interest Expense

The cost incurred by an entity for borrowed funds, which is reported on the income statement.

Pre-Acquisition Dividend

Dividends declared by a subsidiary prior to being acquired or controlled by the parent company.