Which of the following bond would have the greatest price volatility? A) 6%, 3-year bond B)...

Which of the following bond would have the greatest price volatility?

A) 6%, 3-year bond

B) 6%, 10-year bond

C) 3%, 3-year bond

D) 9%, 10-year bond

Solutions

Expert Solution

First of all , longer maturity bonds are more sensitive to change in interest rates.

so A and C are not the answers

Now, with longer maturity bonds but with lower coupon rates are more sensitive to changes in interest rates.

So answer is : B) 6%, 10 year bond

Answer : B) 6%, 10 year bond

I am also attaching a screenshot for verification.

jeff jeffy answered 1 year ago

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