Question #137921
2.3 You have been provided with the following options.
a. A 10-year, R1000 face value, 10 percent coupon bond with semiannual interest payments.
b. A 10-year, R1000 face value, 10 percent coupon bond with annual interest payments.
c. A 10-year, R1000 face value, zero coupon bond. d. A 10-year R100 annuity.
(3 points) Determine which one poses the highest price risk.
a. A 10-year, R1000 face value, 10 percent coupon bond with semiannual interest payments.
b. A 10-year, R1000 face value, 10 percent coupon bond with annual interest payments.
c. A 10-year, R1000 face value, zero coupon bond. d. A 10-year R100 annuity.
(3 points) Determine which one poses the highest price risk.
Expert's answer
c. Because this option generates income in 10 years, while the other options have annual income.
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