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

question 89

Multiple Choice

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

• A) a ten-year bond with a $2,000 face value whose yield to maturity is 5.8% and coupon rate is 5.8% APR paid semiannually
• B) 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
• C) 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 semiannually
• D) 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

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Definitions:

Invalid Offer

An offer that cannot be legally accepted due to its failure to meet certain essential elements or because it involves activities contrary to law.

Counteroffer

An offeree’s response to an offer in which the offeree rejects the original offer and at the same time makes a new offer.

Original Offeror

The entity or individual who first makes an offer or proposal in a contract negotiation scenario.

Offer Terminates

The point at which a proposal or invitation to engage in a contract is revoked or becomes invalid.