On which of the following bonds will a 1% increase in yield have the greatest impact?

Question

Quizplus · Accepted Answer

The bond with the lowest selling price (B) will have the greatest impact with a 1% increase in yield because the increase in yield will represent a larger percentage change in the bond's price. The longer maturity bonds (A and C) will be more sensitive to changes in interest rates, but their impact will not be as significant as the bond with the lower selling price. The bond with the higher selling price (D) will be less sensitive to changes in yield.

On Which of the Following Bonds Will a 1% Increase