Which One of the Following Statements Correctly Describes the Major

question 57

Multiple Choice

Which one of the following statements correctly describes the major drawback of a zero- coupon bond?

• A) The lack of an annual coupon basically prohibits the investor from locking in a high rate of return.
• B) The conversion feature found on most zero- coupon bonds generally requires the investor to switch to a coupon- bearing bond after a period of 5 years.
• C) Because there is no reinvestment of a coupon payment, large capital losses accrue when interest rates decline.
• D) Unless the bond is held in a tax- sheltered account, the investor must pay taxes on the annual accrued interest even though no interest is actually received.

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Definitions:

Pituitary Gland

A small endocrine gland located at the base of the brain that produces hormones regulating growth, metabolism, and reproductive functions.

Releasing Hormones

Hormones secreted by the hypothalamus that stimulate or inhibit the release of hormones from the anterior pituitary.

Hypothalamus

A structure in the forebrain that controls the pituitary gland and so-called homeostatic behaviors such as eating, drinking, temperature control, sleeping, sexual behaviors, and emotional reactions.

Thalamus

A brain structure that acts as a relay station, processing and transmitting information from the senses to the appropriate areas of the brain.