Question 10

A) a bond that is overpriced for a similar bond that is underpriced B) bonds in different sectors of the bond market, based on yield spreads between the sectors a bond with a short maturity for a bond with a long maturity when the investor believes market rates will fall D) a short-duration bond for a long-duration bond in order to increase yield 10. An insurance company issues a guaranteed investment contract (GIC) with a ten-year maturity. The 9 insurance company elects to fund this obligation with a coupon bond that also has a ten-year maturity. Therefore, the insurance company is subject to interest rates increase and to in the event that market in the event that market interest rates decrease. A) losses resulting from duration risk; losses resulting from price risk B) losses resulting from convexity risk; losses resulting from reinvestment rate risk C) losses resulting from reinvestment rate risk; losses resulting from price risk D) losses resulting from price risk; losses resulting from reinvestment rate risk