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How would the price risk of a four-year bond

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Problem 1: We have discussed both Price Risk and Reinvestment Risk. You know that both of these risks are related to (a) term to maturity and (b) size of coupon. How would the Price Risk of a 4-year bond with a 5% coupon compare to the Price Risk of a 20-year bond with a 2% coupon?

Multiple Choice

Option 1: Neither bond has any price risk
Option 2: The 4-year bond with a 5% coupon has less price risk than a 20-year bond with a 2% coupon
Option 3: Both bonds have the same price risk
Option 4: The 4-year bond with a 5% coupon has more price risk than a 20-year bond with a 2% coupon

Reference no: EM132948843

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