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Business, 02.11.2019 07:31 xXCoryxKenshinXx

(a, default/b, reinvestment/c, price) risk is the risk of a decline in a bond's value due to an increase in interest rates. this risk is higher on bonds that have long maturities than on bonds that will mature in the near future. (a, default/b, reinvestment/c, price) risk is the risk that a decline in interest rates will lead to a decline in income from a bond portfolio. this risk is obviously high on callable bonds. it is also high on short-term bonds because the shorter the bond's maturity, the fewer the years before the relatively high old-coupon bonds will be replaced with new low-coupon issues. which type of risk is more relevant to an investor depends on the investor's (a, investment horizon/b, default period/c, option period), which is the period of time an investor plans to hold a particular investment. longer maturity bonds have high (a, reinvestment/b, price/c, exchange) risk but low (a, reinvestment/b, price/c, exchange) risk, while higher coupon bonds have a higher level of (a, reinvestment/b, price/c, exchange) risk and a lower level of (a, reinvestment/b, price/c, exchange) risk. to account for the effects related to both a bond's maturity and coupon, many analysts focus on a measure called (a, correlation/b, duration/c, signaling) , which is the weighted average of the time it takes to receive each of the bond's cash flows. conceptual question:
which of the following bonds would have the largest duration?
a)10year-zero coupon bonds
b)10year-7% annual coupon bonds
c)10year-3% annual coupon bonds
d)5year-3% annual coupon bonds
e)3year-7% annual coupon bonds

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