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Which of the following statements is NOT CORRECT? The time to maturity affects the change in the value of a bond in response to a
Which of the following statements is NOT CORRECT?
The time to maturity affects the change in the value of a bond in response to a given change in interest rates. | |
You hold a 10-year zero coupon bond and a 10-year bond that has a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate drops from the current level, the zero coupon bond will experience a larger percentage increase in price. | |
You hold a 5-year zero coupon bond and a 5-year bond that pays a 6% annual coupon. The same YTM, 10%, applies to both bonds. If YTM increases from the current level, the zero coupon bond will experience a larger percentage increase in price. | |
You hold a 10-year zero coupon bond and a 10-year bond that has a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate rises from the current level, the zero coupon bond will experience a larger percentage decline in price. | |
Other things being equal, the longer the time to maturity, the greater the change in the value of a bond in response to a given change in interest rates. |
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