Exercise 9.2 Suppose you are holding a bond that will pay $5 each year for the next two years from today and mature two years from today. (a) If current two-year market interest rates are 5 percent, what is the market price of your bond? (b) If market interest rates rise tomorrow to 6 percent, what happens to the market price of your bond? (c) What is the "market risk" in holding bonds?

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A:

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