Chapter_7_Questions

Chapter_7_Questions - Chapter7Questions 1 Question7.5pp.239...

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Chapter 7 Questions 1. Question 7.5 pp.239 If you buy a callable bond and interest rates decline, will the value of  your bond rise by as much as it would have risen if the bond had not  been callable?  Explain. If interest rates decline significantly, the values of callable bonds will not rise  by as much as those of bonds without the call provision.  It is likely that the  bonds would be called by the issuer before maturity, so that the issuer can  take advantage of the new, lower rates. 2. Question 7.6 pp.239 Assume that you have a short investment horizon (less than 1 year).  You are considering two investments: a 1-year Treasury security and a  20-year Treasury security. Which of the two investments would you view  as being more risky? Explain. The 20-year Treasury security is more risky than the 1-year Treasury security  because it has a longer time to maturity and more price changes in response  to a given change in interest rates. 3.
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This note was uploaded on 03/31/2011 for the course ACT 1111 taught by Professor Asd during the Spring '11 term at Troy.

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Chapter_7_Questions - Chapter7Questions 1 Question7.5pp.239...

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