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lass Work Check My Work ( 5 remaining ) eBook An investor has two bonds in his portfolio that have a face value of $
lass Work
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An investor has two bonds in his portfolio that have a face value of $ and pay a annual coupon. Bond matures in years, while Bond matures in year. payments are to be made on Bond L Round your answers to the nearest cent.
b Why does the longerterm bond's price vary more than the price of the shorterterm bond when interest rates change?
I. The change in price due to a change in the required rate of return increases as a bond's maturity decreases.
II Longterm bonds have greater interest rate risk than do shortterm bonds.
III. The change in price due to a change in the required rate of return decreases as a bond's maturity increases.
IV Longterm bonds have lower interest rate risk than do shortterm bonds.
V Longterm bonds have lower reinvestment rate risk than do shortterm bonds.
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