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    Treasury Securities Yield to Maturity

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    All treasury securities has a yield to maturity of 7% so the yield curve is flat. If the yield to maturity on all Treasuries were to decline to 6%, which of the following bonds would have the largest percentage increase in price and why?
    a. 15 year zero coupon Treasury bond
    b. 12 year Treasury bond with 10% annual coupon
    c. 15 year Treasury bond with a 12% annual coupon
    d. 2 year zero coupon treasury bond
    e. 2 year Treasury bond with a 15& annual coupon

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    Solution Preview

    As the YTM decrease, the price of the bonds would increase. However, the increase in price is higher for:

    1. Bonds with longer ...

    Solution Summary

    This solution discusses the impacts of lower yield to maturity on the price of bonds.