In Which of the Following Two Bonds Would You Prefer

question 50

Essay

In which of the following two bonds would you prefer to invest if you expect interest
rates to decrease by 50 basis points in the near future? Why?
Bond A: A zero-coupon, 10-year Treasury bond
Bond B: A zero-coupon, 15-year Treasury bond

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Definitions:

Wilcoxon Rank Sum Test

A non-parametric test for assessing whether two independent samples come from the same distribution.

Expected Cell Counts

In chi-squared tests, these refer to the theoretically predicted frequencies of observations in the categories of a contingency table under the null hypothesis.

Degrees of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution or in the calculation after estimating certain parameters.

Contingency Table

A table used to display the frequency distribution of variables and analyze the relationship between categorical variables.