Which of the following statements is most correct?
A) A 10-year bond would have more interest rate risk than a 5-year bond, but all 10-year bonds have the same interest rate risk.
B) A 10-year bond would have more reinvestment rate risk than a 5-year bond, but all 10-year bonds have the same reinvestment rate risk.
C) If their maturities were the same, a 5 percent coupon bond would have more interest rate risk than a 10 percent coupon bond.
D) If their maturities were the same, a 5 percent coupon bond would have less interest rate risk than a 10 percent coupon bond.
E) Zero coupon bonds have more interest rate risk than any other type bond, even perpetuities.

Question

Quizplus · Accepted Answer

A lower coupon bond has more interest rate risk than a higher coupon bond of the same maturity because it has a longer duration, meaning its cash flows are more sensitive to changes in interest rates.

Which of the Following Statements Is Most Correct