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A high coupon bond is more interest rate sensitive than a low coupon bond.
High Coupon Bond
A bond that offers a relatively high interest rate (or coupon rate) compared to the current prevailing rates of other similar bonds.
Interest Rate Sensitivity
A measure of how much the price of an investment, particularly bonds, changes in response to changes in interest rates.
Low Coupon Bond
A bond that pays interest at a lower rate than the market rate, typically resulting in its selling at a discount to face value.
- Acquire knowledge on the determinants impacting bonds' interest rate risk, including coupon rate, maturity period, and the specific attributes of bonds.
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Learning Objectives
- Acquire knowledge on the determinants impacting bonds' interest rate risk, including coupon rate, maturity period, and the specific attributes of bonds.
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