Which of the Following Statements About Interest Rate and Reinvestment

question 3

Multiple Choice

Which of the following statements about interest rate and reinvestment rate risk is CORRECT?

• A) Interest rate price risk exists because fixed-rate debt securities lose value when interest rates rise, while reinvestment rate risk is the risk of earning less than expected when interest payments or debt principal are reinvested.
• B) Interest rate price risk can be eliminated by holding zero coupon bonds.
• C) Reinvestment rate risk can be eliminated by holding variable (or floating) rate bonds.
• D) Interest rate risk can never be reduced.
• E) Variable (or floating) rate securities have more interest rate (price) risk than fixed rate securities.

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Definitions:

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Pairs of concepts or entities that are diametrically different or contrary to each other in characteristics.

Satisfying Relationships

Interpersonal connections that fulfill emotional, physical, and social needs, leading to contentment and happiness.

Research

The systematic investigation into and study of materials and sources to establish facts and reach new conclusions.

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Reduced biological ability to reproduce or conceive children.