The higher the coupon rate, the higher the interest rate risk.

Coupon Rate

The interest rate stated on a bond or other fixed-income security, expressed as a percentage of its face value, that the issuer pays to the bondholder annually.

Interest Rate Risk

The potential loss in value of an investment due to a change in interest rates.

Understand the elements that affect the risk associated with interest rates of bonds, such as the rate of the coupon, duration until maturity, and characteristics of the bond.

Verified Answer

Thirada RuancharoensinJul 27, 2024

Final Answer :

False

Explanation :

Interest rate risk is generally higher for bonds with longer maturities; a higher coupon rate actually makes a bond less sensitive to interest rate changes, reducing interest rate risk.

Learning Objectives

Understand the elements that affect the risk associated with interest rates of bonds, such as the rate of the coupon, duration until maturity, and characteristics of the bond.

The higher the coupon rate, the higher the interest rate risk.

Definitions

Learning Objectives

Learning Objectives

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