A bond manager who wishes to hold the bond with the greatest potential volatility would wise to hold:
A) short-term, high-coupon bonds.
B) long-term, low-coupon bonds.
C) long-term, zero-coupon bonds.
D) short-term, zero-coupon bonds.
E) short-term, low-coupon bonds.

Question

Quizplus · Accepted Answer

Long-term, zero-coupon bonds have the greatest potential volatility because they have the longest duration and no periodic coupon payments, making their prices more sensitive to changes in interest rates.

A Bond Manager Who Wishes to Hold the Bond with the Greatest