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

question 62

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 20-year bond with a $1 000 face value whose coupon rate is 7.4% APR paid semi-annually
• B)a 20-year bond with a $1 000 face value whose coupon rate is 5.8% APR paid semi-annually
• C)a 10-year bond with a $1 000 face value whose coupon rate is 5.8% APR paid semi-annually
• D)a 10-year bond with a $1 000 face value whose coupon rate is 7.4% APR paid semi-annually

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Definitions:

Working Capital Management

The management of a company's short-term assets and liabilities to ensure it has adequate funds to continue its operations and avoid financial distress.

Current Assets

Current assets are assets that a company expects to convert into cash, sell, or consume within one year or within its operating cycle, whichever is longer.

Current Liabilities

Financial obligations of a business that are due and payable within a year.

Collection Process

The method by which a company pursues payment on outstanding invoices from customers, including sending reminders, making calls, or taking legal action.