9. Assuming that the duration of Bond A is 1.94 years, which of the following statements about the effect of a 1% decline in interest rates is true? A. Bond C, having a longer duration than Bond A, would have a larger percentage increase in price than Bond A. B. The percent change in a price of a bond is independent of the duration of a bond. C. It is not possible to determine the percent change in price of Bond A versus Bond C because the duration of Bond C is not given. D. Bond A would have a greater percent change in price vs. Bond C because it has a shorter duration. E. The percent change in the price of Bond A and C is equal since it is not affected by duration. Make your selection:
9. Assuming that the duration of Bond A is 1.94 years, which of the following statements about the effect of a 1% decline in interest rates is true? A. Bond C, having a longer duration than Bond A, would have a larger percentage increase in price than Bond A. B. The percent change in a price of a bond is independent of the duration of a bond. C. It is not possible to determine the percent change in price of Bond A versus Bond C because the duration of Bond C is not given. D. Bond A would have a greater percent change in price vs. Bond C because it has a shorter duration. E. The percent change in the price of Bond A and C is equal since it is not affected by duration. Make your selection:
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Bond A has a 6% coupon, paid semi-annually and is due in 2 years. It’s value is currently $ 900.
Bond B has a 10% coupon, paid semi-annually and is due in 4 years. It is priced to yield 12%.
Bond C is a zero-coupon
Transcribed Image Text:9. Assuming that the duration of Bond A is 1.94 years, which of the following statements about
the effect of a 1% decline in interest rates is true?
Bond C, having a longer duration than Bond A, would have a larger percentage
increase in price than Bond A.
B. The percent change in a price of a bond is independent of the duration of a bond.
C.
It is not possible to determine the percent change in price of Bond A versus Bond C because
the duration of Bond C is not given.
D. Bond A would have a greater percent change in price vs. Bond C because it has a shorter duration.
E. The percent change in the price of Bond A and C is equal since it is not affected by duration.
Make your selection:
A.
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