For two bonds identical but for coupon, the market price of the lower coupon bond will change more (in percentage terms) than that of the higher coupon bond for a given change in market interest rates.

Question

Quizplus · Accepted Answer

Lower coupon bonds have longer durations, making them more sensitive to changes in interest rates, causing their prices to fluctuate more in percentage terms than higher coupon bonds for a given change in market interest rates.

For Two Bonds Identical but for Coupon, the Market Price