Abstract
With rising interest rate trends, deep discount bonds are more commonly observed. The traditional view has been that, for a given yield change, the changes in bond prices are larger, the longer the maturity. This note shows that, for a deep discount bond, there is a switchover point beyond which the traditional view no longer holds. This is true for percentage as well as for dollar price changes. The traditional view should be corrected to avoid misleading effects on the management of bond portfolios.
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