1. A bond manager expects interest rates to decline and has to choose between 2

Question

1.     A bond manager expects interest rates to decline and has to choose between 2 bonds.  Both bonds are 10 years, but Bond has a 5% coupon and YTM (yield to maturity) while Bond B has a coupon of 3% and a 4% YTM.

a.     Choose Bond A because it has a higher coupon

b.     Choose Bond A because it has a higher YTM

c.     Choose Bond B because it has a lower coupon

d.     Choose both bonds because the maturity is the same

A bond manager expects interest rates to decline and has to choose between 2 bonds. Both bonds are 10 years, but Bond has a 5% coupon and YTM (yield to maturity) while Bond B has a coupon of 3% and a 4% YTM. Choose Bond A because it has a higher coupon Choose Bond A because it has a higher YTM Choose Bond B because it has a lower coupon Choose both bonds because the maturity is the same

Explanation / Answer

c. Choose Bond B because it has a lower coupon

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