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Bond that will have the higher interest rate risk?

Bond that will have higher interest rate risk? 

A) High coupon rate

B) Low coupon rate

Thank you

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Coupon and interest rate sensitivity are inversely related, the higher the interest rate risk the lower the coupon. The lower the interest rate risk the higher the coupon.

Hope this helps.

I wrote an article about this: http://financialexamhelp123.com/macaulay-duration-modified-duration-and-...

Longer duration means higher interest rate risk; shorter duration means lower interest rate risk.

Factors leading to longer duration:

  • Longer maturity
  • Lower coupon rate
  • Less frequent coupon payments
  • Lower YTM
  • Nonamortization

Factors leading to shorter duration:

  • Shorter maturity
  • Higher coupon rate
  • More frequent coupon payments
  • Higher YTM
  • Amortization

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Simplify the complicated side; don't complify the simplicated side.

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Thank you 

My pleasure.

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/