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DURATION. Bond A and Bond B have the same maturity of 10 years. However, Bond A has a duration of 9 years while Bond B

DURATION. Bond A and Bond B have the same maturity of 10 years. However, Bond A has a duration of 9 years while Bond B has a duration of 8 years. If interest rates RISE, the value of ___ will ___; but ___.

1)

Both bonds; rise; Bond A will rise more

2)

Both bonds; fall; Bond A will fall more

3)

Only Bond B; rise; Bond A will also rise subsequently

4)

Only Bond A; fall; Bond B will also fall subsequently

5)

Both bonds; stay the same; Bond B will later rise.

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