An Investor Holds Two Bonds, One with 5 Years Until

question 86

Multiple Choice

An investor holds two bonds, one with 5 years until maturity and the other with 20 years until maturity. Which of the following is more likely if interest rates suddenly increase by 2%?

• A) The 5-year bond will decrease more in price.
• B) The 20-year bond will decrease more in price.
• C) Both bonds will decrease in price similarly.
• D)Neither bond will decrease in price, but their yields will increase.

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Definitions:

Character

The aggregate of features and traits that form the individual nature of a person or a thing.

Social Entity

An organization or system that exists within a society and influences it.

Relationships

The manner by which two or more ideas, items, or individuals are linked, or the condition of being linked.

Notes from Underground

A novella by Fyodor Dostoevsky that presents a deep psychological insight into the thoughts and motivations of a disillusioned, isolated protagonist.