Holding other factors constant, the interest-rate risk of a coupon bond is lower when the bond's

Question

Quizplus · Accepted Answer

The interest-rate risk of a coupon bond is lower when the bond's term to maturity is lower and coupon rate is higher. This is because a bond with a shorter term to maturity will be less affected by changes in interest rates, and a bond with a higher coupon rate will provide more income to offset any potential losses from a decline in interest rates.

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