The prices of high-coupon bonds tend to be less sensitive to a given change in interest rates than low-coupon bonds, other things equal and held constant.

Question

Quizplus · Accepted Answer

High-coupon bonds pay a higher percentage of their face value as interest, so investors are already receiving a relatively high return. As a result, they are generally less sensitive to interest rate changes than low-coupon bonds, which pay a lower rate of interest and would need to offer a higher return to be competitive with other investments if interest rates rise.

The Prices of High-Coupon Bonds Tend to Be Less Sensitive