Have you been exposed reinvestment risk

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Reference no: EM131552951

1) Suppose you purchased a bond with a 5% annual coupon payment that expires in 10 years. Two years later the risk-free rate is 7%. Have you been exposed to interest rate risk? Have you been exposed reinvestment risk? Briefly explain why and what interest and reinvestment risk are.

2) Assuming all other bond characteristics are identical which bond would pay a higher coupon payment? Very briefly explain why.

a) A callable bond or a convertible bond

b) A bond with negative covenants vs a bond without negative covenants

c) A Treasury Strip or a regular Treasury bond

d) A secured vs unsecured bond

Reference no: EM131552951

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