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Kiana Foster
on Oct 19, 2024

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Everything else equal, the ________ the maturity of a bond and the ________ the coupon, the greater the sensitivity of the bond's price to interest rate changes.

A) longer; higher
B) longer; lower
C) shorter; higher
D) shorter; lower

Maturity

The date on which the principal amount of a financial instrument, such as a bond or loan, becomes due and is repaid to the investor.

Coupon

The yearly rate of interest distributed on a bond, represented as a percentage of its nominal value.

Interest Rate Changes

Variations in the cost of borrowing money, typically determined by central banks, influencing various financial and economic decisions.

  • Explain the concepts of bond maturity, coupon rates, and their impact on bond sensitivity to interest rate changes.
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Malia EarleOct 26, 2024
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