28. Interest Rate Risk. Suppose interest rates increase from 8% to 9%. Which bond will suffer the...

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28. Interest Rate Risk. Suppose interest rates increase from 8% to 9%. Which bond will suffer the greater percentage decline in price: a 30-year bond paying annual coupons of 8% or a 30-year zero-coupon bond? Can you explain intuitively why the zero exhibits greater interest rate risk even though it has the same maturity as the coupon bond? (LO3)

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Fundamentals Of Corporate Finance

ISBN: 9780073382302

6th Edition

Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus

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