Question
There are two bonds. Bond A is a zero-coupon bond with a maturity of 20 years, the yield to maturity is 3%, and a face
There are two bonds. Bond A is a zero-coupon bond with a maturity of 20 years, the yield to maturity is 3%, and a face value of 1100. Bond B is a coupon-paying bond with a maturity of 15 years, a face value of $1200, and a yield to maturity of 4%. The coupon rate of this bond is 6%. The prices of both bonds are not provided. Consider the following two statements:
I. The zero-coupon bond has a higher duration than the coupon-paying bond
II. If the coupon rate of Bond B is higher than 6%, then all else equal (ceteris paribus), the duration of Bond B will be lower.
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