Assume you desire maximum duration to take advantage of anticipated interest rate declines. Answer the following questions

Question:

Assume you desire maximum duration to take advantage of anticipated interest rate declines. Answer the following questions based on information taken from Tables 18–6 and 18–7 on page 474.
a. Would you prefer an 8 percent rate bond with a 20-year or a 12 percent rate bond with a 25-year The market rate of interest is 8 percent.
b. Would you prefer an 8 percent rate bond with a 20-year or a 4 percent rate bond with a 25-year The market rate of interest is 12 percent.
c. Would you prefer an 8 percent rate bond with a 20-year or a 12 percent rate bond with a 25-year The market rate of interest is 12 percent.
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...