Question: Question 2 A zero coupon bond is selling for RM876. The bond has a face value of RM1,000 and matures in 10 years. Your friend

Question 2 A zero coupon bond is selling for RM876. The bond has a face value of RM1,000 and matures in 10 years. Your friend asks you if he should buy the bond. He tells you his required return is 10 percent. Would you recommend he buy the bond or not? Explain your answer.

Question 3 If there is a decline in interest rates, which would you rather be holding, long-term bonds or short-term bonds? Why? Which type of bond has the greater interest-rate risk?

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