To achieve the maximum price impact from an estimated interest rate decrease, a bond buyer should purchase bonds with relatively:
A) high coupon rates and long maturities.
B) high coupon rates and short maturities.
C) low coupon rates and long maturities.
D) low coupon rates and short maturities.

Question

Quizplus · Accepted Answer

Bonds with low coupon rates and long maturities are more sensitive to interest rate changes, thus providing a greater price impact when rates decrease.

To Achieve the Maximum Price Impact from an Estimated Interest