Assume that all interest rates in the economy decline from 10 percent to 9 percent. Which of the following bonds will have the largest percentage increase in price? OA) A 4-year bond with a 24 percent coupon rate. B) An 8-year bond with a 12 percent coupon rate. OC) An 8-year zero coupon bond. OD) A 12-year bond with a 8 percent coupon rate. E) A 12-year zero coupon bond.
Assume that all interest rates in the economy decline from 10 percent to 9 percent. Which of the following bonds will have the largest percentage increase in price? OA) A 4-year bond with a 24 percent coupon rate. B) An 8-year bond with a 12 percent coupon rate. OC) An 8-year zero coupon bond. OD) A 12-year bond with a 8 percent coupon rate. E) A 12-year zero coupon bond.
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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Transcribed Image Text:Assume that all interest rates in the economy decline from 10 percent to 9 percent.
Which of the following bonds will have the largest percentage increase in price?
OA) A 4-year bond with a 24 percent coupon rate.
B) An 8-year bond with a 12 percent coupon rate.
OC) An 8-year zero coupon bond.
OD) A 12-year bond with a 8 percent coupon rate.
E) A 12-year zero coupon bond.
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