A 10-year Treasury bond has an 8% coupon, and an 8-year Treasury bond has a 10%

Question

A 10-year Treasury bond has an 8% coupon, and an 8-year Treasury bond has a 10% coupon. Both bonds have the same yield to maturity. If the yield to maturity of both bonds increases by the same amount, which of the following statements would be CORRECT? a The prices of both bonds will decrease by the same amount. b Both bonds would decline in price, but the 10-year bond would have the greater percentage decline in price. c The prices of both bonds would increase by the same amount. d One bond's price would increase, while the other bond

Explanation / Answer

C

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