A debt security with a low coupon rate compared to one with a high coupon rate, both having the same maturity date, will behave as though it has a longer maturity than the high-coupon security.

Question

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A debt security with a low coupon rate is more sensitive to interest rate changes than one with a high coupon rate, making its price more volatile and effectively giving it the characteristics of having a longer maturity. This is because the present value of its cash flows (which are smaller due to the lower coupon rate) is more affected by changes in interest rates.

A Debt Security with a Low Coupon Rate Compared to One