Assume that all interest rates in the economy decline from 10% to 9%. Which of the following bonds would have the largest percentage increase in price?

A. An 8-year bond with a 9% coupon.
B. A 1-year bond with a 15% coupon.
C. A 3-year bond with a 10% coupon.
D. A 10-year zero coupon bond.
E. A 10-year bond with a 10% coupon.


Answer: D

Business

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