Suppose that yields $($ytm$)$ for every maturity suddenly drop by $3\%.$ Which of the following bonds will be affected the most $($in terms of percentage change in price$)?$

Question $6$Answer

a$.$

A zero$-$coupon bond with maturity $5$ years

b$.$

All bonds will be affected the same

c$.$

A coupon bond with coupon rate $10\%$ and maturity $3$ years

d$.$

Bond prices are not affected by yields

e$.$

A coupon bond with coupon rate $20\%$ and maturity $5$ years

f$.$

A zero$-$coupon bond with maturity $3$ years

g$.$

A coupon bond with coupon rate $10\%$ and maturity $5$ years

h$.$

A coupon bond with coupon rate $20\%$ and maturity $3$ years