Bond a and b are identical expect that bond b has a longer


1. How long must one wait (to the nearest year) for an initial investment of $1000 to triple in value if the investment earns 8% compound annually?

a. 9.81 years

b. 14.27 years

c. 22.01 years

d. 25.00 years

Explain

2. Bond A and B are identical expect that, bond B has a longer maturity. Which of these best explains the price impact of a fall in yield?

a) the impact will be greatest for A because its duration is longer

b) Bond A, because duration is shorter

c) Bond B, because duration is longer

d) Bond B, because duration is shorter

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Financial Management: Bond a and b are identical expect that bond b has a longer
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