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I have the MCQ answer but can you please provide workings / explained answer if possible? A 10-year Treasury bond has an 8 percent coupon.
I have the MCQ answer but can you please provide workings / explained answer if possible?
A 10-year Treasury bond has an 8 percent coupon. An 8-year Treasury bond has a 10 percent coupon. Both bonds are exposed to the same market interest rates, hence the same required rate of returns. If the market interest rates of both bonds decrease by the same amount, which of the following statements is most correct? a. Both bonds will decline in price, but the 10-year bond will have a greater percentage decline in price than the 8-year bond. b. The prices of both bonds will decrease by the same amount. c. The prices of the two bonds will remain the same. d. Both bonds will decline in price, but the 8-year bond will have a greater percentage decline in price than the 10-year bond. e. Both bonds will increase in price, but the 10-year bond will have a greater percentage increase in price than the 8-year bond
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