All else held constant, interest rate risk will increase when the time to maturity: increases or the coupon rate increases. decreases and the coupon rate equals zero. increases or the coupon rate decreases. decreases or the coupon rate decreases. decreases or the coupon rate increases.

Question

Juan Rose

Business

12 October, 10:51

All else held constant, interest rate risk will increase when the time to maturity: increases or the coupon rate increases. decreases and the coupon rate equals zero. increases or the coupon rate decreases. decreases or the coupon rate decreases. decreases or the coupon rate increases.

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Answers (1)

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Jesse Bautista · Answer 1

The maturity of the bond is the specific date specifically in the future by which the face value of the bond will get repaid to the ones who invested. When the maturity period is longer, the interest rate of the bond increases.

In terms of the coupon rate, the interest rate risk will increase when the coupon rate becomes lower. Hence, the answer to this item is,

increase and the coupon rate decrease.

This is the third choice.