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An investor has two bonds in his portfolio that have a face value of $ 1 , 0 0 0 and pay an 1 1

An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 11 years, while Bond S matures in 1 year.
a. What will the value of the Bond L be if the going interest rate is 5%,7%, and 12%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 11 more payments are to be made on Bond L. Round your answers to the nearest cent.
b. Why does the longer-term bond's price vary more than the price of the shorter-term bond when interest rates change?
I. Long-term bonds have lower reinvestment rate risk than do short-term bonds.
II. The change in price due to a change in the required rate of return increases as a bond's maturity decreases.
III. Long-term bonds have greater interest rate risk than do short-term bonds.
IV. The change in price due to a change in the required rate of return decreases as a bond's maturity increases.
V. Long-term bonds have lower interest rate risk than do short-term bonds.
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