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Business, 07.03.2020 01:46 ashleyroberson735

It is a myth that bonds are always less risky than stocks. Bond investors can really lose their shirts (go broke) in a rising interest rate environment. Suppose you buy a 12-year bond with a face value of $10,000 and a coupon rate of 2%. Interest rates unexpectedly double over the next 12 months. You become discouraged and cash out. How much will you be able to raise by selling the bond?

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