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1. Do the interest rate and the bond price move in the same or opposite direction? If you are a bond investor and you expect

1. Do the interest rate and the bond price move in the same or opposite direction? If you are a bond investor and you expect that the Federal Reserve will cut the interest rate in 3 months, what action you are going to take now? Why?

2. Discuss the difference between the interest rate risk (price risk) and the reinvestment rate risk (reinvestment risk) in terms of time to maturity.

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