Question: Suppose a recently published report indicates inflation in both Canada and the U.S. is at an all time low and the Canadian dollar is strengthening.

  1. Suppose a recently published report indicates inflation in both Canada and the U.S. is at an all time low and the Canadian dollar is strengthening. You hear a news report that the bond market has rallied (prices have increased). Which one of the following Canadian bonds would likely show the highest % price increase? (2 marks)
    1. Low coupon, short-term
    2. High coupon, long-term
    3. High coupon, short-term

Low coupon, long-term

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