If two bonds have the same maturity and the same expected rate of return,but one has a higher coupon,the price of the low coupon bond will be more affected by a given change in interest rates.

Question

Quizplus · Accepted Answer

The price of a bond is inversely related to the yield or interest rate. If interest rates rise, the price of a bond falls, and if interest rates fall, the price of a bond rises. However, the magnitude of this price change depends on the coupon rate of the bond. A bond with a lower coupon rate will be more impacted by a change in interest rates than a higher coupon bond with the same maturity because it is earning a lower interest rate and is therefore less attractive to investors. As a result, the price of the low coupon bond will drop more than the high coupon bond when interest rates rise or increase more than the high coupon bond when interest rates fall.

If Two Bonds Have the Same Maturity and the Same