Which of the bonds A-D is most sensitive to a 1% drop in interest rates from 6%

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Which of the bonds A-D is most sensitive to a 1% drop in interest rates from 6% to 5% and why? Which bond is least sensitive? Provide an intuition explanation for your answer.

Consider the following bonds.

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Corporate Finance

ISBN: 9780273792024

3rd Global Edition

Authors: Peter Demarzo, Jonathan Berk

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Question Posted: Jun 11, 2024 01:04 AM

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Which of the bonds A-D is most sensitive to a 1% drop in interest rates from 6%

Question:

Bond Coupon Rate (annual payments) Maturity (years) A 0% B 0% C 4% D babad 8% 5050 15 10 15 10

Step by Step Answer:

Corporate Finance

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