A 8%, 30-year bond is being valued at a 4% flat yield curve with 20% interest rate volatility. The bond is callable in 10 years. Which key rate duration is the highest for this bond?

A. 2-year
B. 10-year
C. 30-year

Correct Answer: B

Because the coupon rate is so high the bond is almost certainly to be called in year 10. It behaves like a 10-year option-free bond.