Question: Would your answers to parts b through c change if both bonds matured in 1 3 years and paid a 1 2 % annual coupon
Would your answers to parts b through c change if both bonds matured in years and paid a annual coupon and, if so how?Select the best choice below.
A
Yes the answers will change. The bond with a lower required return has less interest rate risk if they are identical except differing in the required returns.
B
No the answers will not change. The bond with a lower required return has greater interest rate risk no matter whether they are identical or not.
C
No the answers will not change. The bond with a lower required return has greater interest rate risk as long as the bond's coupon rate is higher than its required return.
D
Yes the answers will change. The bond with a lower required return has less interest rate risk if they have the same number of years to maturity.
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