An investor has two bonds in their portfolio paying the same coupon rate, one with 3 years until maturity and the other with 10 years until maturity. Which of the following scenarios is more likely if interest rates increase by 2%? O The 10-year bond will decrease more in price The 3-year bond will decrease more in price Neither bond will decrease in price, but their yields will increase Both bonds will decrease in price by the same proportion

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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An investor has two bonds in their portfolio paying the same coupon rate, one with 3 years until maturity and the other with 10 years until maturity. Which of the
following scenarios is more likely if interest rates increase by 2%?
The 10-year bond will decrease more in price
The 3-year bond will decrease more in price
Neither bond will decrease in price, but their yields will increase
Both bonds will decrease in price by the same proportion
Transcribed Image Text:An investor has two bonds in their portfolio paying the same coupon rate, one with 3 years until maturity and the other with 10 years until maturity. Which of the following scenarios is more likely if interest rates increase by 2%? The 10-year bond will decrease more in price The 3-year bond will decrease more in price Neither bond will decrease in price, but their yields will increase Both bonds will decrease in price by the same proportion
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