An investor has two bonds in his investment portfolio.Bond A matures in 5 years and Bond B matures in 10 years.All else equal,which bond would have a greater price sensitivity to a given change in interest rates?
A) Bond A would have a greater sensitivity to a given change in interest rates due to its relative shorter term to maturity.
B) Bond A and Bond B would have relatively similar changes in price given a change in interest rates since term to maturity has no effect on bond price sensitivity.
C) Bond B would have a greater sensitivity to a given change in interest rates as it has a longer term to maturity.
D) There is no relationship between changes in interest rates and the price of bonds.
Correct Answer:
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