Which of the Following Statements Is CORRECT

question 12

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) Long-term bonds have less interest rate price risk but more reinvestment rate risk than short-term bonds.
• C) If interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less interest rate risk.
• D) 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.
• E) Long-term bonds have less interest rate price risk and also less reinvestment rate risk than short-term bonds.

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Definitions:

Estimated Payments

Quarterly payments made towards the expected tax liability for the year, common for self-employed individuals or those without sufficient tax withholding.

Form 1040

The standard IRS form that individuals use to file their annual income tax returns.

Household Workers

Individuals employed within a private home to perform domestic tasks, such as cleaning, cooking, and childcare.

Quarterly 941 Return

A quarterly tax form employers file to report federal withholdings and Social Security and Medicare taxes for employees.