Multiple Choice
Which of the following statements is CORRECT?
A) long-term bonds have less interest rate price risk but more reinvestment rate risk than short-term bonds.
B) if interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less interest rate risk.
C) relative to a coupon-bearing bond with the same maturity, a zero coupon bond has more interest rate price risk but less reinvestment rate risk.
D) long-term bonds have less interest rate price risk and also less reinvestment rate risk than short-term bonds.
E) one advantage of a zero coupon treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold.
Correct Answer:
Verified
Correct Answer:
Verified
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