Which of the following bonds will be most sensitive to a change in interest rates if all bonds have the same initial yield to maturity?
A) a ten-year bond with a $1,000 face value whose coupon rate is 5.8% APR paid semiannually
B) a ten-year bond with a $1,000 face value whose coupon rate is 7.4% APR paid semiannually
C) a 20-year bond with a $1,000 face value whose coupon rate is 5.8% APR paid semiannually
D) a 20-year bond with a $1,000 face value whose coupon rate is 7.4% APR paid semiannually

Question

Quizplus · Accepted Answer

Longer maturity bonds are more sensitive to interest rate changes, and since options C and D have the same maturity, the bond with the lower coupon rate (C) is more sensitive to interest rate changes.

Which of the Following Bonds Will Be Most Sensitive to a Change