Question: Consider risk of the bonds. Explain the difference between interest rate risk and reinvestment rate risk Which of the two long-term bonds in Ms. Peabodys

  1. Consider risk of the bonds.
    1. Explain the difference between interest rate risk and reinvestment rate risk
    2. Which of the two long-term bonds in Ms. Peabodys portfolio have the greatest price risk? Why? If you are using the excel spreadsheet, illustrate your answer by calculating the change in value of each bond assuming the interest rates rose from the initial 9% to 12% and dropped from 9% to 6%.

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