An investor who expects declining interest rates would maximize her capital gain by purchasing a bond that has a ________ coupon and a ________ term to maturity.

Question

Quizplus · Accepted Answer

A bond with a zero coupon and a long term to maturity is most sensitive to interest rate changes, meaning its price would increase the most if interest rates decline, maximizing capital gains for the investor.

An Investor Who Expects Declining Interest Rates Would Maximize Her