Bond A sells at $975. Bond B sells at $1010. Both bonds have a coupon rate of 4%. All else equal, which bond has more interest rate risk?

Bond A

Explanation:

Interest rate risk is the likelihood of loss to bondholders emanating from an increase in a bond's market interest rate which is also the yield to maturity.

However, a bond is issued at a premium when its market interest rate is lower than the coupon rate and at a discount when the reverse is the case.

In this instance, bond A was issued at a discount  while B was issued at a premium, hence, the market interest rate of Bond A is higher and it has a higher interest rate risk due to its yield to maturity which made it trade at a discount to the face value of $1000 per bond

this conflict is person vs. society

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a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.