Which of the following Treasury bonds will have the largest amount of interest rate risk (price risk)?
A) A 7 percent coupon bond which matures in 12 years.
B) A 9 percent coupon bond which matures in 10 years.
C) A 12 percent coupon bond which matures in 7 years.
D) A 7 percent coupon bond which matures in 9 years.
E) A 10 percent coupon bond which matures in 10 years.

Question

Quizplus · Accepted Answer

The bond with the longest maturity and a lower coupon rate will have the largest amount of interest rate risk, as changes in interest rates will have a greater impact on its price. choice A is the only bond with a longer maturity than the others and a lower coupon rate.

Which of the Following Treasury Bonds Will Have the Largest