eBook Problem Walk-Through An Investor has two bonds in his portfolio that have a face value of $1,000 and pay a 12% annual coupon. Bond L matures in 13 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%, 8%, and 13%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 13 more payments are to be made on Bond L. Round your answers to the nearest cent. 7% 8% 13% Bond L $ $ $ 1417.88 938.78 1037.04 3 Bonds $ $ 1316.15 1046.73 991.15 b. Why does the longer term bond's price vary more than the price of the shorter-term bond when interest rates change? 1. The change in price due to a change in the required rate of return increases as a bond's maturity decreases. II. Long-term bonds have greater interest rate risk than do short-term bonds. III. The change in price due to a change in the required rate of return decreases as a bond's maturity increases, IV. Long-term bonds have lower interest rate risk than do short-term bonds. V. Long-term bonds have lower reinvestment rate risk than do short-term bonds. II Hide Feedback Partially Correct