Question
You own two bonds: A zero-coupon bond with a 3-year maturity and a 10% coupon rate. A par-value bond with a 3-year maturity and 10%
You own two bonds:
A zero-coupon bond with a 3-year maturity and a 10% coupon rate.
A par-value bond with a 3-year maturity and 10% yield to maturity.
Required:
What of your two bonds is more sensitive to changes in interest rates?
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
The length of time that a bond has been in circulation is an indicator of how sensitive it is to shifts in the interest rate environment The term duration refers to the weighted average amount of time ...
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Step: 3
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Investments An Introduction
Authors: Herbert B Mayo
9th Edition
324561385, 978-0324561388
