Assume that all interest rates in the economy decline from 10 percent to 9 percent. Which of the following bonds will have the largest percentage increase in price?
A) A 10-year bond with a 10 percent coupon.
B) An 8-year bond with a 9 percent coupon.
C) A 10-year zero coupon bond.
D) A 1-year bond with a 15 percent coupon.
E) A 3-year bond with a 10 percent coupon.
Correct Answer:
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