An analyst is evaluating the two bonds below:Compa
An analyst is evaluating the two bonds below:
Compared with Bond A, Bond B most likely will have:
A.less interest rate risk and more reinvestment risk.
B.more interest rate risk and less reinvestment risk.
C.less interest rate risk and less reinvestment risk.
参考解答
4j8***102
2024-11-14 20:57:31
Ans:A;
Since both securities have essentially the same maturity, all else the same, the bond with the lower coupon rate will have a higher sensitivity to changes in interest rates. Therefore, Bond B will have less interest rate risk.
The higher the yield on the bond, the more the reinvestment risk, because the investor must be able to reinvest at the same yield. Therefore, Bond B will have more reinvestment risk.
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