Assume That All Interest Rates in the Economy Decline from 10

question 132

Multiple Choice

Assume that all interest rates in the economy decline from 10% to 9%.Which bond would have the largest percentage increase in price?

• A)a 1-year bond with a 15% coupon
• B)a 3-year bond with a 10% coupon
• C)an 8-year bond with a 9% coupon
• D)a 10-year zero coupon bond

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Definitions:

Energy

The capacity to do work, existing in various forms such as kinetic, potential, thermal, electrical, chemical, and nuclear.

Calories

A unit of energy used to measure the amount of energy food provides to the body.

Nutrient Absorption

The process by which nutrients from digested food are taken up from the intestinal tract into the bloodstream.

Small Intestine

A long, coiled part of the digestive system where most of the digestion and absorption of nutrients takes place.