SIE practice questionmediumDuration and Convexity
If two bonds have the same maturity but different coupons, the bond with the lower coupon will:
- AHave a higher duration✓ Correct answer
- BHave a lower duration
- CBe less price sensitive to rates
- DBe completely immune to interest rate changes
Explanation
Why A — Have a higher duration
Lower coupon means higher duration and more price sensitivity. There is no immunity to rate changes.
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