Given that two bonds have the same maturity, yield to maturity and different coupon rate, which...
Given that two bonds have the same maturity, yield to maturity and different coupon rate, which of the following is true? Is it A.The high coupon bond will be sold for premium. B. The lower coupon bond will be sold for premium. C.The high coupon bond will have higher interest rate risk., D.The low coupon rate bond will have higher interest rate risk.?
Homework Answers
.The low coupon rate bond will have higher interest rate risk
For the same time to maturity, a lower coupon bond will have greater change in price when market interest rate changes than a bond with higher coupon rate. This is called coupon effect.
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Given that two bonds have the same maturity, yield to maturity
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