An investor plans to retire in 10 years. As part of the retirement portfolio, the investor buys
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An investor plans to retire in 10 years. As part of the retirement portfolio, the investor buys a newly issued, 12-year, 8% annual coupon payment bond. The bond is purchased at par value, so its yield-to-maturity is 8.00% stated as an effective annual rate.
Does this bond at purchase entail the risk of higher or lower interest rates? Interest rate risk here means an immediate, one-time, parallel yield curve shift.
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