Which of the Following Statements About STRIPs Is True

question 33

Multiple Choice

Which of the following statements about STRIPs is true?

• A) STRIPs are sold directly by the Treasury Department
• B) When a STRIP is created, all interest payments become one security and the principal payment becomes the other.
• C) Many small investors prefer STRIPs because they require a lower minimum investment than original Treasury notes and bonds.
• D) Treasury securities dealers create STRIPs because they expect to sell the created zero-coupon securities for more than what they paid for the original Treasury security.
• E) None of the above statements is true.

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Definitions:

Bretton Woods Accord

An agreement established in 1944 that set the exchange rate system and established the International Monetary Fund and the World Bank.

Fixed

Expenses that remain constant for a period of time and do not vary with production levels or sales volume.

Specified Levels

Predetermined benchmarks or criteria that need to be met within certain contexts, such as quality standards or performance thresholds.

Hedging

A risk management strategy used to reduce or limit potential losses by taking offsetting positions in related securities or derivatives.