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Greater interest rate risk

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Reference no: EM133120875

Consider the following bonds:

Bond

Years till maturity

Coupon %

A

5

5.5

B

9

4.0

C

14

5.0

D

21

3.5

Currently, the yield on similar bonds is 5.0%. If the interest rates decrease to 4.75%, which of the bonds is subject to a greater interest rate risk?

A. Bond A because its price increased by 1.09%

B. Bond B because its price increased by 1.87%

C. Bond C because its price increased by 2.54%

D. Bond D because its price increased by 3.56%

Reference no: EM133120875

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