Question
Assume Bonds X and Y both have 3.5% annual coupons and mature 6 years from today. Bond X currently trades at $987.36, while Bond Y
Assume Bonds X and Y both have 3.5% annual coupons and mature 6 years from today. Bond X currently trades at $987.36, while Bond Y trades at $1,038.95. Which of the following statements is true?
A. Bond X has the higher modified duration because it is trading at a discount
B. Bond X has the higher modified duration because its yield is lower relative to Bond Y
C. Bond Y has the higher modified duration because its future payments are discounted at a lower rate
D. Bond Y has the higher modified duration because its yield is higher relative to Bond X
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Fundamentals of Investments, Valuation and Management
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
8th edition
1259720697, 1259720691, 1260109437, 9781260109436, 978-1259720697
