Question

if you are holding two identical bonds, except that one matures in 10 years and the other matures in 5 years, which bond's price will be more sensitive to interest rate risk?

Answer 1

The 10 year bond will be more sensitive to interest rate risk. The amount of interest due each period expressed as a percentage of the amount lent, deposited, or borrowed is known as an interest rate.

What is Interest rate?

The amount of interest due each period expressed as a percentage of the amount lent, deposited, or borrowed is known as an interest rate. The total interest on a loaned or borrowed sum is determined by the principal amount, the interest rate, the frequency of compounding, and the period of time the loan, deposit, or borrowing was made.

An interest rate indicates how expensive borrowing is or how lucrative saving is. Therefore, if you are a borrower, the interest rate is the sum you pay for borrowing money and is expressed as a percentage of the overall loan amount.

With the help of the interest rate formula, we can calculate the interest rate, which is the percentage of the principle sum that the lender or bank would charge the borrower in exchange for using its assets or money for a given period of time. Interest Rate = (Simple Interest 100)/(Principal Time) is the formula for calculating interest rates.

To learn more about interest rate refer to:

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