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Aa 12. investing in bonds investing Aa A security with higher risk will have a higher expected return. A bond's risk level is reflected in
Aa 12. investing in bonds investing Aa A security with higher risk will have a higher expected return. A bond's risk level is reflected in its yield, but understanding the different risks involved when investing in bonds is important. The curves on the following graph show the prices of two 10% annual coupon bonds at various interest rates. BOND VALUE IS 2000 750 500 250 Year Bond 1000 750 500 0 Year Bond 250 12 16 20 INTEREST RATE E%I Based on the graph, which of the following statements is true? O Both bonds have equal interest rate risk. O The 1-year bond has more interest rate risk. O Neither bond has any interest rate risk. O The 10-year bond has more interest rate risk
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