An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 13% annual coupon. Bond L matures in 18 years, while Bond S matures in 1 year.

1. What will the value of the Bond L be if the going interest rate is 7%, 9%, and 14%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 18 more payments are to be made on Bond L. Round your answers to the nearest cent.
2. Why does the longer-term bonds price vary more than the price of the shorter-term bond when interest rates change?

An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 13% annual coupon. Bond L matures in 18 years, while Bond S matures in 1 year. a. What will the value of the Bond L be if the going interest rate is 7%, 9%, and 14%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 18 more payments are to be made on Bond L. Round your answers to the nearest cent. 7% 9% 14% Bond L $ $ $ Bond S $ $ $ 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 interest rate risk than do short-term bonds. II. Long-term bonds have lower reinvestment rate risk than do short-term bonds. III. The change in price due to a change in the required rate of return increases as a bond's maturity decreases. IV. Long-term bonds have greater interest rate risk than do short-term bonds. The change in price due to a change in the required rate of return decreases as a bond's maturity increases. -Select- 1 Il MI IV V Grade it NON Savo & Continua