M&B3 3rd Edition by Dean Croushore

Exercise 10

Nora the novice investor wants to invest her money for the next year. She is thinking of buying a bond with 20 years to maturity instead of a bond with one year to maturity because the interest rate on 20-year bonds is 6 percent and the interest rate on one-year bonds is only 5.5 percent. As her investment advisor, what would you suggest that Nora think about in making her decision