4. If an investor has a long term investment horizon relative to the time to maturity of the bond, then which of the following interest rate risks is most important to the investor?

A. Market price risk

B. Coupon re-investment risk

C. Effective duration

5. Assume that bond ABC and XYZ have the same maturity and the coupon rate of one bond is 5% and the second 13%. The yield curve for this issuer is flat at 8%. Based on this information, which bond is the lower coupon bond and which is the higher coupon bond?

	Estimated percentage change in price if interest rates change by:
	-50 basis points	+50 basis points
Bond ABC	+12%	-9%
Bond XYZ	+11%	-8%

A. ABC is the higher coupon bond, XYZ is the lower coupon bond

B. ABC is the lower coupon bond, XYZ is the higher coupon bond

C. There is not enough information to tell