If its yield to maturity declined by 1%, which of the following bonds would have the largest percentage increase in value?

Question

Quizplus · Accepted Answer

A bond with a longer maturation period will have a higher percentage increase in value if its yield to maturity declines, holding all else equal. Furthermore, a zero-coupon bond is even more sensitive to yield changes than a coupon bond. As a result, a 10-year zero coupon bond would experience the largest percentage increase in value if its yield to maturity falls by 1%.

If Its Yield to Maturity Declined by 1%, Which of the Following