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:

Beginning Equity

The value of an owner's interest in a company at the start of an accounting period.

Ending Equity

The value of an owner’s interest in a company at the end of an accounting period, determined by subtracting liabilities from assets.

Payroll Accrual

An accounting method that records payroll expenses incurred but not yet paid out to employees, ensuring expenses are recognized in the period they are incurred.

Accounting Period

The span of time covered by financial statements, often a quarter or year, reflecting the company's financial performance and position.