Which of the following bonds will be most sensitive to a change in interest rates?
A) a ten-year bond with a $2,000 face value whose yield to maturity is 5.8% and coupon rate is 5.8% APR paid semiannually
B) a 15-year bond with a $5,000 face value whose yield to maturity is 7.4% and coupon rate is 6.2% APR paid annually
C) a 20-year bond with a $3,000 face value whose yield to maturity is 6.0% and coupon rate is 5.4% APR paid semiannually
D) a 30-year bond with a $1,000 face value whose yield to maturity is 5.5% and coupon rate is 6.4% APR paid annually

Question

Quizplus · Accepted Answer

The 30-year bond (D) will be most sensitive to a change in interest rates because it has the longest maturity. Generally, the longer the maturity of a bond, the more its price will fluctuate in response to changes in interest rates.

Which of the Following Bonds Will Be Most Sensitive to a Change