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Which of the following bonds will have the smallest percentage decrease in price if all required returns increase by 1%?
A. 20-year zero-coupon bond
B. 1-year 10% coupon bond
C. 20-year 10% coupon bond
Answer: B
Explanation:
A bond's time to maturity is positively related to the elasticity of the bond's price with respect to changes in its required return. A bond's coupon rate is inversely related to the elasticity of the bond's price with respect to changes in its required return.
NEW QUESTION: 2
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Which technology should be used to this?
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E. JCA
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