Bond A and Bond $B$ are $6\%$ coupon bonds, and have a $7\%$ YTM$,$ and pays annually. Bond $A$ is $1$ year from maturity and Bond $B$ is $3$

years from maturity. Calculate the duration of Bond B$.$

Question $6$

Bond A and Bond $B$ are $6\%$ coupon bonds, and have a $7\%$ YTM$,$ and pays annually. Bond A is $1$ year from maturity and Bond B is $3$

years from maturity. Based on your answers, what does this problem tell you about interest rate risk?

As interest rates increase, bond prices decrease.

As interest rates decrease, bond prices increase.

The lower the coupon rate, the greater the interest rate risk and this is reflected in duration.

The greater the time to maturity, the greater than interest rate risk and this is reflected in duration.