Which bond is more sensitive to an interest rate change of 0.75 percent?
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)Bond A
B)Bond B
C)Both are equally sensitive.
D)Cannot be determined

Question

Quizplus · Accepted Answer

Bond A has a longer maturity and a lower yield to maturity, making it more sensitive to interest rate changes.

Which Bond Is More Sensitive to an Interest Rate Change