Price risk Answer: c Diff: M
30. If the yield to maturity decreased 1 percentage point, which of the following bonds would have the largest percentage increase in value?
a. A 1-year bond with an 8 percent coupon.
b. A 1-year zero coupon bond.
c. A 10-year zero coupon bond.
d. A 10-year bond with an 8 percent coupon.
e. A 10-year bond with a 12 percent coupon.
Price risk Answer: a Diff: M
31. If interest rates fall from 8 percent to 7 percent, which of the following bonds will have the largest percentage increase in its value?
a. A 10-year zero coupon bond.
b. A 10-year bond with a 10 percent semiannual coupon.
c. A 10-year bond with a 10 percent annual coupon.
d. A 5-year zero coupon bond.
e. A 5-year bond with a 12 percent annual coupon.
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