As compared with equivalent maturity bonds selling at par, deep discount bonds will have ________.

Question

Quizplus · Accepted Answer

Deep discount bonds are sold at a significant discount to their face value, which makes them more sensitive to changes in interest rates and thus, more volatile in price. This means they will have greater price volatility than equivalent maturity bonds selling at par. They also have less reinvestment risk since they have less cash flow. However, they may have less call protection and a longer average maturity.

As Compared with Equivalent Maturity Bonds Selling at Par, Deep