Ah, the age-old question of bond price sensitivity. It's all about the derivative, my friends. Just differentiate the bond price with respect to the yield and there's your answer. Simple as pi.
Wait, we're talking about coupons? I thought this was a test on how to maximize my snack budget. Where's the multiple-choice question on whether Doritos or Cheetos are the superior chip?
D can't be right, can it? The sensitivity has to depend on whether the yield is going up or down. Unless the bond market is just a giant game of Calvinball, that is.
C seems like the correct answer to me. The sensitivity is greater for increases in yield to maturity than for decreases. It's like the bond market is more sensitive to bad news than good news. Go figure!
I think the answer is B. The sensitivity of the coupon price is inversely related to the bond's yield to maturity. This makes sense because as the yield increases, the price of the bond decreases.
Sheron
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