Which of the following two bonds is more price sensitive to changes in interest rates?
1) A par value bond,X,with a 5-year-to-maturity and a 10% coupon rate.
2) A zero-coupon bond,Y,with a 5-year-to-maturity and a 10% yield-to-maturity.
A) Bond X because of the higher yield to maturity.
B) Bond X because of the longer time to maturity.
C) Bond Y because of the longer duration.
D) Both have the same sensitivity because both have the same yield to maturity.
E) None of the above
Correct Answer:
Verified
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