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in irvestar has two bonds in his portfolio that have a face value of $1,000 and pay a 10% annual coupon. Bond L matures in
in irvestar has two bonds in his portfolio that have a face value of $1,000 and pay a 10% annual coupon. Bond L matures in 20 years, while Bond 5 matures in 1 year a. What will the value of the Bond L be if the geing interest rate is 6%, 8\%, and 114 ? Assume that only one more interest payment is to be made on Bond 5 at its maturity and that 20 more payments are to be made on Bond L. found your answers to the nearest cent. b. Why does the longer-term bond's price vary more than the price of the shorter-term bond when interest rates change? 1. Long-term bonds have greater interest rate risk than do short-term bonds. 11. The change in peice due to a change in the reauired rate of return decreases as a bond's maturity increases. III. Long-term bonds have lower interest rate risk than do short-term bonds. IV. Long-term bonds have lower reinvestment rate risk than do short-term bonds. v. The change in price due to a change in the required rate of return increases as a bond's maturity decreases
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