Which of the following bonds has the greatest volatility?Group of answer choices10-year, zero-coupon bond5-year coupon bond5-year, zero-coupon bond10-year coupon bond
Question
Which of the following bonds has the greatest volatility?Group of answer choices10-year, zero-coupon bond5-year coupon bond5-year, zero-coupon bond10-year coupon bond
Solution
The bond with the greatest volatility would be the 10-year, zero-coupon bond.
Here's why:
-
Zero-coupon bonds are more volatile than coupon bonds. This is because they do not pay interest until maturity, so their prices are more sensitive to changes in interest rates.
-
Longer-term bonds are more volatile than shorter-term bonds. This is because the longer the maturity, the more time there is for interest rates to change and affect the bond's price.
Therefore, among the options given, the 10-year, zero-coupon bond would have the greatest volatility.
Similar Questions
Which of the following bonds has the longest duration?Group of answer choices10-year coupon bond5-year, zero-coupon bond5-year coupon bond10-year, zero-coupon bond
Which of the following bonds has the highest convexity?Question 5Select one:a.A 12%, 15-year coupon bondb.A 12%, 5-year coupon bondc.A 6%, 15-year coupon bondd.A 6%, 5-year coupon bond
Which of the following bonds has the highest interest rate?
Which of the following bonds has the highest interest rate?Group of answer choicesA high credit risk and a short termA low credit risk and a short termA long term and a high credit riskA long term and a low credit risk
Other things being the same, which of the following bonds has the highest interest rate sensitivity?Question 12Select one:a.A 15-year maturity, 6% coupon bondb.A 5-year maturity, 3% coupon bondc.A 5-year maturity, 6% coupon bondd.A 15-year maturity, 3% coupon bond
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.