Problem 6:

You have an investment horizon of 10 years. Which of the following has more interest rate risk?

(1) Invest in a 12-year zero and sell it after 10 years.

(2) invest in a 10-year sequence of 1-year zeros (when one 1-year zero matures, roll the money over into the next one-year zero, for 10 years).

Explain your answer.