1. An investor buys a 5-year bond and a 10-year bond. Which statement is true?
A. The interest rate risk is higher for the 5-year bond.
B. The interest rate risk is higher for the 10-year bond.
C. The interest rate is the same for both bonds.
D. The interest rate risk is negligible given recent actions by the Federal Reserve.
2. The coupon interest rates for a bond are 3.2%. The required rate of return for that bond has now changed with market rates and is 4.2%. Which statement offers the BEST conclusion?
A. The bond's market value exceeds its par value.
B. The bond's market value is less than its par value.
C. The bond's market value is the same as its par value.
D. The bond is now consider a premium bond.