Question: Which of the following bonds will have the largest decrease in price if interest rates increase in Year 1 of the life of the bonds?

Which of the following bonds will have the largest decrease in price if interest rates increase in Year 1 of the life of the bonds?

A. An option free 11-year 9% coupon bond selling at a discount.

B. A 10-year 5% coupon bond that is callable at 104 in three years.

C. A 7-year 4% coupon bond that is puttable after two years.

D. A 10-year zero coupon bond.

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