The prices of low coupon bonds tend to fluctuate more than the prices of high coupon bonds.

Name: The prices of low coupon bonds tend to fluctuate more than the prices of high coupon bonds.
Brand: Quizplus
Rating: 4.9 (51 reviews)

Question

Quizplus · Accepted Answer

Low coupon bonds are more sensitive to interest rate changes than high coupon bonds, causing their prices to fluctuate more. This is because the present value of the bond's future cash flows (which are lower for low coupon bonds) is more affected by changes in the discount rate (interest rates).

The Prices of Low Coupon Bonds Tend to Fluctuate More