Question
Consider the following bonds. Bond, Coupon Rate (annual payments) & Maturity (years) Bond A: 0.0% 10 years Bond B: 0.0% 15 years Bond C: 3.8%
Consider the following bonds.
Bond, Coupon Rate (annual payments) & Maturity (years)
Bond A: 0.0% 10 years
Bond B: 0.0% 15 years
Bond C: 3.8% 15 years
Bond D: 8.1% 10 years
Which of the bonds A to D is most sensitive to a 1% drop in interest rates from 6.7% to 5.7% ? Which bond is least sensitive? Provide an intuitive explanation for your answer.
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Financial Reporting And Statement Analysis A Strategic Perspective
Authors: Clyde P. Stickney, Paul Brown
4th Edition
0030238110, 978-0030238116
