ou are considering invesring in either a 10 year bond with a 4% cupon and a 6 year bond witha 8% cupon. Assume that both bods have equal credit risk and assume that your goal is to increase the value of your investments. If you expect a
ou are considering invesring in either a 10 year bond with a 4% cupon and a 6 year bond witha 8% cupon. Assume that both bods have equal credit risk and assume that your goal is to increase the value of your investments. If you expect a
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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you are considering invesring in either a 10 year bond with a 4% cupon and a 6 year bond witha 8% cupon. Assume that both bods have equal credit risk and assume that your goal is to increase the value of your investments. If you expect a 0.75% increase in interest ratesm which bond you you rather be holding?
a) perfer the 8% cupon bond because the maturity is shorter and the cupon rate is higher
b) cannot be solved to becasue the YMT is not given
c) Cannot be solved because the price isn't given
d) prefer the 4% cupon bond because the maturity is longer and the cupon rate is lower
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