2B3D WHICH ONE OF THE FOLLOWING STATEMENTS CONCERNING DEBT INSTRUMENT...

120.

CSO: 2B3c

LOS: 2B3d

Which one of the following statements concerning debt instruments is correct?

a.

The coupon rate and yield of an outstanding long-term bond will change over

time as economic factors change.

b.

A 25-year bond with a coupon rate of 9% and one year to maturity has more

interest rate risk than a 10-year bond with a 9% coupon issued by the same firm

with one year to maturity.

c.

For long-term bonds, price sensitivity to a given change in interest rates is greater

the longer the maturity of the bond.

d.

A bond with one year to maturity would have more interest rate risk than a bond

with 15 years to maturity.