SIE Exam Question 1020: Answer and Explanation

Question: 1020

Which of the following is correct regarding the relationship between a bond's coupon and its duration?

• A. Higher coupon = Lower duration = Lower interest rate risk
• B. Higher coupon = Higher duration = Higher interest rate risk
• C. Higher coupon = Lower duration = Higher interest rate risk
• D. Higher coupon = Higher duration = Lower interest rate risk

Correct Answer: A

Explanation:

Higher coupon = Lower duration = Lower interest rate risk