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

Question

Quizplus · Accepted Answer

A lower coupon bond has more interest rate price risk than a higher coupon bond of the same maturity because the lower coupon bond's cash flows are more heavily weighted towards the maturity date, making it more sensitive to interest rate changes.

Which of the Following Statements Is Correct