solution
solution.
Interest Rate Risk. How is interest rate risk affected by a bond’s maturity? How can investors use expectations of interest rate movements to their advantage?
If interest rates were to rise, the price of a: (Select the best answer below.)
A. 20-year bond and a 1-year bond would fall relatively the same.
B. 20-year bond would fall to a greater extent than the price of a 1-year bond.
C. 20-year bond and a 1-year bond would rise relatively the same.
D. 1-year bond would fall to a greater extent than the price of a 20-year bond.
If an investor expects interest rates will decline over time, he should invest in: (Select the best answer below.)
A. longer-term maturity bonds.
B. stocks.
C. shorter-term maturity bonds.
D. some long-term and some short-term maturity bonds.
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