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A owns a $10,000 5-year coupon bond with 5% coupon, paid once every year. B owns a $20,000 5-year zero-coupon bond which pays 15% interest.
A owns a $10,000 5-year coupon bond with 5% coupon, paid once every year.
B owns a $20,000 5-year zero-coupon bond which pays 15% interest. From the information given, the following must be true:
A) If the market interest rate rises, then the duration of As bond will rise.
B) If the market interest rate rises, then the duration of Bs bond will rise.
C) The duration of As bond is always 5 years.
D) If the market interest rate rises, then the duration of As bond will drop.
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