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Tutorial 15313

Assume that all interest rates in the economy decline from 10 percent to 9 percent. Which of the following bonds will have the largest percentage incr...

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Question:

Assume that all interest rates in the economy decline from 10 percent to 9 percent. Which of the following bonds will have the largest percentage increase in price?

A.            A 10-year bond with a 10 percent coupon.                                          

B.            An 8-year bond with a 9 percent coupon.                                            

C.            A 10-year zero coupon bond                                      

D.            A 1-year bond with a 15 percent coupon.                                             

E.            A 3-year bond with a 10 percent coupon.                                             

 

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