Question
Consider two bonds. Both pay an 8% coupon and have yields of 6%. Bond A matures in 5 years, while Bond B matures in 8
Consider two bonds. Both pay an 8% coupon and have yields of 6%. Bond A matures in 5 years, while Bond B matures in 8 years. Which one has a higher price? Which one has higher duration? (For the first part of this question, remember what weve covered about the price of discount/premium bonds as the bonds approach maturity.)
a
Bond A has the higher price and higher duration
b
Bond B has the higher price and higher duration
c
Bond A has the higher price, Bond B has higher duration
Your answer - incorrect
d
Bond B has the higher price, Bond A has higher duration
e
Bond A has the higher price, but both have the same duration
f
Bond B has the higher price, but both have the same duration
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