SOLUTION: Please advise: Which of the following has the highest interest rate risk? A) a 20 yr U.S. Treasury Bond B) Bendix Corporations 6 month commercial paper C) a six month market

Question 174513This question is from textbook Foundations of Finance
: Please advise:
Which of the following has the highest interest rate risk?
A) a 20 yr U.S. Treasury Bond
B) Bendix Corporations 6 month commercial paper
C) a six month market certificate at a federally insured bank
D) a Southwest Airlines bond maturing in 4 years.
I have eliminated A since the financial banking is from the US Gov.
The remaining 3 options all will have a high interst rate, please help and thank you This question is from textbook Foundations of Finance

Answer by Mathtut(3670) (Show Source): You can put this solution on YOUR website!
both A and C are backed and insured
:
Bendix is owned by Honeywell corp who is highly diversified
:
whereas Southwest airlines is not very diversified and the airlines are VERY risky to own.
:
I would pick Southwest Airlines as the highest RISK based on current information.
:
I dont believe that either the bonds with southwest or the commercial paper with Bendix is secured....so this would be based on that premise
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