Question
Based on Malkiels theorems, which of the following statements is correct? Neither of the choices provided is correct. Higher coupon bond prices are less volatile,
Based on Malkiels theorems, which of the following statements is correct?
Neither of the choices provided is correct. | ||
Higher coupon bond prices are less volatile, in terms of percent change, than lower coupon bond prices when interest rates fluctuate. | ||
For a 5-year 6% coupon bond selling at par, the absolute value of the increase in the price of the bond from a 100-basis point drop in interest rates will equal the absolute value of the decrease in the price of the bond from a 100-basis point increase in interest rates. | ||
Both choices provided are correct. |
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