1. Which bond is most exposed to reinvestment rate risk?
An 8-year bond with a 9% coupon.
A 2-year bond with a 15% coupon.
A 3-year bond with a 10% coupon.
A 10-year zero coupon bond.
A 10-year bond with a 10% coupon.
2. The net asset value of shares in a closed-end nvestment company is $36. An investor buys the shares for $34 in the secondary market. The company distributes $1 and after one year, the net asset rises to $42. The investor sells the shares for $44 in the secondary market. What is the discount?
a) 4.7%
b) 5.9%
c) 6.3%
d) 7.5%