Sample Question #81 (finance – bond pricing)
[Given the recent turmoils in the credit markets, here’s another fixed income question – a real one asked at interviews!]
I have two bonds, one with a long duration and the other with a short duration. I expect the bond market to be bearish. Which bond should I buy?
What if instead having an opinion on the market direction, I expect the bond market to have higher-than-usual volatility? Which bond should I buy?