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Estimate greatest interest rate risk

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Reference no: EM132806823

You are faced with the following alternative fixed income investments.

  1. a U.S. Treasury bond with an 11.625% coupon, due in 2024 with a price of $142.50 and a yield to maturity of 6.3%
  2. a U.S. Treasury strip bond (zero coupon) due in 2024 with a price of $46.75 and a yield to maturity of 6.25%
  3. a corporate B-rated bond with a 9.75% coupon, due in 2024 with a price of $104.75 and a yield to maturity of 8.79% 

Which of these bonds has the greatest interest rate risk?

Group of answer choices

a. (1)

b. (2)

c. (3)

We don't have enough information to determine interest rate risk.

Reference no: EM132806823

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