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:
Verified
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