Please explain Q.118??
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Answer would be Option B.
Interest rate risk means % change in bond price for a 1% parallel shift in the yield. It’s meanured by Duration.
Understand it this way. ZeroCoupon Bond has the highest volatility coz there is no coupon payment in between to fight the power effect of the principle payment. If the interest rate changes there is only the effect of last payment. But in case of coupon payment they also play a small role and kill the volatility. Higher the coupon payment higher the flight they’ll give to the last payemnt. So lesser interest rate risk. But since you’ll get a higher coupon, if interest rate falls in the market, you have to invest a high amount, at low rate. So higher reinvestment risk. Therefore higher coupon payment kills interest rate risk but enhances reinvestment risk.
Hope it helps