Question 3 (1 point) You have a bond with a maturity of 1 year and another with maturity of 4 years. If the yield on both bonds rises by one percentage point The 1 year bond rises in price by more than the 4 year bond. The 1 year bond falls in price by more than the 4 year bond. The 1 year bond rises in price by less than the 4 year bond. The 1 year bond falls in price by less than the 4 year bond.
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This is because the fixed interest payments of the bond become less attractive compared to other investments that offer a higher yield. Now, between a 1-year bond and a 4-year bond, the price of the 4-year bond is more sensitive to changes in yield. This is Show more…
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