Which one of the following combination of features causes bond prices to be the most volatile?
A) low coupon, short maturity
B) high coupon, short maturity
C) low coupon, long maturity
D) high coupon, long maturity

Question

Quizplus · Accepted Answer

Low coupon, long maturity bonds are the most volatile because they have a longer duration, meaning they are more sensitive to changes in interest rates. Low coupons result in lower periodic cash flows, increasing the bond's sensitivity to interest rate changes, and a longer maturity extends the time frame over which these changes can impact the bond's price.

Which One of the Following Combination of Features Causes Bond