D6 Assume you own a 2-year US Treasury Note with a 5% coupon and a 7-year US Treasury Note with a 0% coupon. If market interest rates decrease by 100 basis points in the 2-year maturity and declined by only 75 basis points in the 7-year maturity, which bond would experience the smallest market value change? a. 5% US Treasury due in 2 years b. 0% US Treasury due in 7 years c. Both would change by the same amount d. Prices would not change since the coupons are fixed
D6 Assume you own a 2-year US Treasury Note with a 5% coupon and a 7-year US Treasury Note with a 0% coupon. If market interest rates decrease by 100 basis points in the 2-year maturity and declined by only 75 basis points in the 7-year maturity, which bond would experience the smallest market value change? a. 5% US Treasury due in 2 years b. 0% US Treasury due in 7 years c. Both would change by the same amount d. Prices would not change since the coupons are fixed
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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D6
Assume you own a 2-year US Treasury Note with a 5% coupon and a 7-year
US Treasury Note with a 0% coupon. If market interest rates decrease by
100 basis points in the 2-year maturity and declined by only 75 basis points in the
7-year maturity, which bond would experience the smallest
market value change?
a. 5% US Treasury due in 2 years
b. 0% US Treasury due in 7 years
c. Both would change by the same amount
d. Prices would not change since the coupons are fixed
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