All Else Being Equal, a Bond with a Higher Coupon

question 3

Multiple Choice

All else being equal, a bond with a higher coupon has a duration that is ________ than that of a bond with a lower coupon.

• A) greater than.
• B) less than.
• C) equal to.
• D) undetermined in relation to.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, typically paid at a set rate over the life of the borrowing.

Notes Payable

Liabilities represented by written promises to pay a specified sum of money, usually with interest, by a certain date.

Notes Payable

A written agreement where the borrower promises to pay back a specified sum to the lender by a certain date.

Interest Expense

The amount a company has to spend over time for taking out loans.