Two bonds are selling at par value, and each has 17 years to maturity.The first bond has a coupon rate of 6%, and the second bond has a coupon rate of 13%.Which of the following is true about the durations of these bonds?

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Quizplus · Accepted Answer

The duration of a bond, which measures its price sensitivity to changes in interest rates, is generally lower for bonds with higher coupon rates. This is because higher coupon rates mean that more of the bond's cash flows are received earlier in its life, reducing the bond's sensitivity to interest rate changes. Therefore, the bond with a 6% coupon rate (lower coupon) will have a higher duration than the bond with a 13% coupon rate (higher coupon).

Two Bonds Are Selling at Par Value, and Each Has