Which bond is more sensitive to an interest rate change of 0.75%?
Bond A: YTM = 4.00%, Maturity = 8 years, Coupon = 6% or $60, Par Value = $1,000
Bond B: YTM = 3.50%, Maturity = 5 years, Coupon = 7% or $70, Par Value = $1,000
A) A
B) B
C) Both the same
D) Cannot be determined

Question

Quizplus · Accepted Answer

Bond A has a longer maturity and a lower YTM compared to Bond B, meaning that it has a higher duration and is more sensitive to changes in interest rates. Therefore, Bond A is more sensitive to an interest rate change of 0.75%.

Which Bond Is More Sensitive to an Interest Rate Change