Which of the following two bonds are more prices sensitive, Ask an Expert

Economics

Which of the following two bonds are more prices sensitive to changes in interest rate?

I. A par value bond, X, with 6-year-to-maturity and 10% coupon rate.

II. A zero coupon bond, Y, with 5-year-to-maturity and 10% yield-to-maturity.

A. Bond X because it has a higher yield to maturity.

B. Bond X because it has a longer time to maturity.

C. Bond Y because it has longer duration.

D. Both have the same sensitivity because they have the same yield to maturiy.

(Why?)

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91406074

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