Consider two bonds, a 3-year bond paying an annual coupon of 5% and a 10-year bond also
Question:
a. What is the new price of the 3-year bonds?
b. What is the new price of the 10-year bonds?
c. Do you conclude that long-term or short-term bonds are more sensitive to a change in interest rates?
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...
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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