1. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1-year)?
2. Oil Well Supply offers a 8 percent coupon bond with semiannual payments and a yield to maturity of 8.73 percent. The bonds mature in 8 years. What is the market price per bond if the face value is $1,000?
3. Assess the effectiveness of using multifactor models to help investors understand the relative risk exposures in their portfolios relative to benchmark portfolios. Make a recommendation on how investor understanding may be improved. Support your rationale.