Holding other factors constant,the interest-rate risk of a coupon bond is higher when the bond's:
A) term-to-maturity is lower.
B) coupon rate is higher.
C) yield to maturity is lower.
D) current yield is higher.
E) none of these.

Question

Quizplus · Accepted Answer

A lower yield to maturity increases the bond's duration, making it more sensitive to interest rate changes, thus increasing interest-rate risk.

Holding Other Factors Constant,the Interest-Rate Risk of a Coupon Bond