What a bond ladder is

What does a ladder do to reinvestment risk?

• Removes it, because the rungs are spread out
• Spreads it, so only one rung meets each year's rates
• Increases it, because you reinvest more often

A rung yields 5.0% and matures in 4 years with face $5,000. Which expression gives its price today?

• 5,000 × 1.05⁴
• 5,000 ÷ (1 + 0.05 × 4)
• 5,000 ÷ 1.05⁴