All Other Things Being Equal, a Given Change in the Interest

question 49

True/False

All other things being equal, a given change in the interest rates will have a greater impact on the price of a low-coupon bond than a higher-coupon bond with the same maturity.

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Definitions:

Convertible Feature

A characteristic of some bonds or preferred stocks that allows them to be converted into a specified number of common shares, usually at the discretion of the holder.

Floating-rate Bond

A bond whose interest payments vary with market interest rates, as opposed to a fixed-rate bond.

Implicit Interest

The interest amount represented in the difference between the present value and the future value of a payment or investment.

Nominal Face Value

The stated value of a financial instrument (e.g., bond) at issuance, unrelated to market value.