7. Problem 7.05 (Bond Valuation) eBook Problem Walk-Through An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 8% annual coupon. Bond L matures in 11 years, while Bond s matures in 1 year. a. What will the value of the Bond L be if the going interest rate is 5%, 6%, and 9%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 11 more payments are to be made on Bond L. Round your answers to the nearest cent. 5% 9% Bond L $ Bonds $ $ $ b. Why does the longer-term bond's price vary more than the price of the shorter term bond when interest rates change? 1. Long-term bonds have lower interest rate risk than do short-term bonds. II. Long-term bonds have lower reinvestment rate risk than do short-term bonds. III. The change in price due to a change in the required rate of return increases as a bond's maturity decreases IV. Long-term bonds have greater interest rate risk than do short-term bonds V. The change in price due to a change in the required rate of return decreases as a bond's maturity increases Grade it Now Save & Continue Continue without saving