Which of the following bonds has the greatest volatility?
A)5-year coupon bond
B)5-year, zero-coupon bond
C)10-year coupon bond
D)10-year, zero-coupon bond

Question

Quizplus · Accepted Answer

Zero-coupon bonds generally have greater volatility than coupon bonds because their prices are more sensitive to changes in interest rates. Additionally, longer-term bonds tend to be more volatile than shorter-term bonds. Therefore, the 10-year, zero-coupon bond has the greatest volatility among the given options.

Which of the Following Bonds Has the Greatest Volatility