An Investor Holds Two Bonds, One with Five Years Until

An investor holds two bonds, one with five years until maturity and the other with 20 years until maturity.Which of the following is more likely if interest rates suddenly decrease by 2 percent?

A) The five-year bond will increase more in price
B) The 20-year bond will increase more in price
C) Both bonds will increase in price similarly
D) Neither bond will increase in price, but yields will decrease

Correct Answer:

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