Investors in U

question 29

Multiple Choice

Investors in U.S. Treasury STRIPs are primarily interested in eliminating which of the following bond investor risks?

• A) default risk
• B) price risk
• C) reinvestment risk
• D) foreign exchange risk

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Definitions:

Present Value Factors

Multipliers used in calculating the present value of a future amount of money or cash flows, considering a specific interest rate over a period of time.

Capital Lease

An accounting treatment for leases where the lessee records the leased property as if it was purchased, showing both an asset and a liability on the balance sheet for the lease obligation.

Residual Value

The projected amount an asset is expected to yield when sold after its period of usefulness has ended.

Contingent Rentals

Lease payments that are not fixed and determined but depend on a future event or condition.