A security with higher risk will have a higher expected return. A band's risk level is reflected in its yield, but understanding the different risks involved when investing in bonds is important The curves on the following graph show the prices of two 10% annual coupon bands at various interest rates. BOND VALUES 2000 1500 1293 2 10- 1 4 8 12 21 INTEREST RATEINI Based on the graph, which of the following statements is true? O Neither bond has any interest rate risk O Both bonds have equal interest rate risk. The 1-year bond has more interest rate risk. The 10-year bond has more interest rate risk Frank Barlowe is retiring soon, so he's concerned about his investments providing him with a steady income every year. He's aware that if interest rates - the potential caming power of the cash flow from his investments will increase. In particular, he is concerned that a decline in interest rates might lead to annual income from his investments. What kind of risk i Frank most concerned about protecting against? Interest rate risk O Reinvestment rate risk Answer the following question based on your understanding of interest rate risk and reinvestment rate risk True or False: Assuring all else is equal, long term Securities are exposed to higher interest rate risk than short term securities True O False