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

question 4

Multiple Choice

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

• A)a 110-year bond with a $2 000 face value whose yield to maturity is 5.8% and coupon rate is 5.8% APR paid semi-annually
• B)a 30-year bond with a $1 000 face value whose yield to maturity is 5.5% and coupon rate is 6.4% APR paid annually
• C)a 15-year bond with a $5 000 face value whose yield to maturity is 7.4% and coupon rate is 6.2% APR paid annually
• D)a 20-year bond with a $3 000 face value whose yield to maturity is 6.0% and coupon rate is 5.4% APR paid semi-annually

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Definitions:

High Price

A situation where the cost of a good or service is considered above the average or expected price point.

Nash Equilibrium

A concept in game theory where no player can benefit by changing their strategy while the other players keep theirs unchanged.

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Frozen beverages made by mixing and freezing flavored sweet liquid with ice, typically consumed during hot weather.

Tourist Town

A town or city that is heavily reliant on tourism as its primary source of income and employment.