Which of the following two bonds is more price sensitive to changes in interest rates
1) A par value bond, A, with a 12-year-to-maturity and a 12% coupon rate.
2) A zero-coupon bond, B, with a 12-year-to-maturity and a 12% yield to maturity.
A) Bond A because of the higher yield to maturity.
B) Bond A because of the longer time to maturity.
C) Bond B because of the longer duration.
D) Both have the same sensitivity because both have the same yield to maturity.
E) None of the options
Correct Answer:
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