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