✏️ Duration and Interest Rate Risk Practice
✏️ Which of the following bonds has the highest interest rate risk? They have the same YTM.
- 8 year bond with c=8%
- 12 year bond with c=6%
- 8 year bond with c=6%
- 12 year bond with c=8%
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B.
B has a higher duration than A because it has a lower coupon rate and a higher maturity.
B has a higher duration than C because it has a higher maturity.
B has a higher duration than D because it has lower coupon rate. ✅
6 Principles of Interest Rate Sensitivity | 5 Rules of Duration |
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✏️ Which of the following bonds has the highest interest rate risk?
- 12 year bond with YTM=8%, c=8%
- 12 year bond with YTM=8%, c=6%
- 12 year bond with YTM=5%, c=6%
- 12 year bond with YTM=12%, c=6%
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C.
C has a higher duration than A because it has a lower coupon rate and a lower YTM.
C has a higher duration than B because it has a lower YTM.
C has a higher duration than D because it has a lower YTM. ✅