Consider the following bonds. Bond A B C D Coupon Rate (annual payments) Maturity (years) 0.0% 0.0% 4.4% 7.9% 10 15 15 10 Which of the bonds A to D is most sensitive to a 1% drop in interest rates from 6.4% to 5.4%? Which bond is least sensitive? Provide an intuitive explanation for your answer.
Consider the following bonds. Bond A B C D Coupon Rate (annual payments) Maturity (years) 0.0% 0.0% 4.4% 7.9% 10 15 15 10 Which of the bonds A to D is most sensitive to a 1% drop in interest rates from 6.4% to 5.4%? Which bond is least sensitive? Provide an intuitive explanation for your answer.
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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![Consider the following bonds.
Bond
ABC
A
Bond is most sensitive. (Select from the drop-down menu.)
C
Coupon Rate (annual payments)
0.0%
0.0%
4.4%
7.9%
B
Maturity (years)
10
D
Which of the bonds A to D is most sensitive to a 1% drop in interest rates from 6.4% to 5.4% ? Which bond is
least sensitive? Provide an intuitive explanation for your answer.
D
550
15
15
4](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fec5e0ab8-d00a-4c94-9861-9928dd3e4c5b%2F9dec03bc-55c7-4b1a-8652-9c53621979af%2F3tw5hxm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the following bonds.
Bond
ABC
A
Bond is most sensitive. (Select from the drop-down menu.)
C
Coupon Rate (annual payments)
0.0%
0.0%
4.4%
7.9%
B
Maturity (years)
10
D
Which of the bonds A to D is most sensitive to a 1% drop in interest rates from 6.4% to 5.4% ? Which bond is
least sensitive? Provide an intuitive explanation for your answer.
D
550
15
15
4
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