Suppose there are three government bonds as follows:

Bond has a maturity of years and pays an annual coupon of
Bond has a maturity of years and pays an annual coupon of
Bond has a maturity of years and pays an annual coupon of

The
yield curve is flat. As interest rates change the whole curve moves up or down
in parallel (or equivalently, there is a single interest rate that varies
through time)

Which
of the following statements is correct:

Question

Suppose there are three government bonds as follows: 
 
 Bond    has a maturity of    years and pays an annual coupon of   
 Bond    has a maturity of    years and pays an annual coupon of   
 Bond    has a maturity of    years and pays an annual coupon of   
 
 The
yield curve is flat. As interest rates change the whole curve moves up or down
in parallel (or equivalently, there is a single interest rate that varies
through time) 
 
 Which
of the following statements is correct:

Accepted Answer

As the interest rate rises, all three bonds will fall in price but Bond C will fall proportionately the most because it has the longest duration. Bond B will fall the least because it has the shortest duration

Answer

As the interest rate rises, all three bonds will rise in price but Bond B will rise proportionally the most because it has the longest duration. Bond A will rise the least because it has the shortest duration

Answer

As the interest rate rises, all three bonds will fall in price but Bond B will fall proportionately the most because it has the longest duration. Bond C will fall the least because it has the shortest duration

Answer

As the interest rate rises, all three bonds will fall in price but Bond C will fall proportionately the most because it has the shortest duration. Bond A will fall the least because it has the longest duration

Answer

As the interest rate rises, all three bonds will rise in price but Bond C will rise proportionally the most because it has the longest duration. Bond B will rise the least because it has the shortest duration

Crowdly

Suppose there are three government bonds as follows: Bond has a maturity ...

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