Difference between price risk and reinvestment risk

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Reference no: EM132020701

1. Explain the difference between price risk and reinvestment risk.

2. If your banker tells you that he will make you a 10-year loan for $30,000 at an interest rate of 5%, what does your annual cash flow have to be in order to service the loan?

3. A portfolio manager holds a default swap to hedge an AA corporate bond position. If the counterparty of the default swap is acquired by the bond issuer, what happens to the value of the default swap? ?

Reference no: EM132020701

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