Interest Rate Risk

Winston Investments is considering three new bond issues:

	Bond 1	Bond 2	Bond 3
Face value	CAD 450,000	CAD 450,000	CAD 450,000
Coupon rate	0.0%	6.5%	6.5%
Market rate	6.5%	6.5%	6.5%
Term	10 years	5 years	10 years

Interest is payable on June 30 and December 31.

Which bond has the highest level of interest rate risk?

Select one:

a. Bond 1

b. Bond 2

c. Bond 3