Which of the Following Statements Is CORRECT

question 83

Multiple Choice

Which of the following statements is CORRECT?

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

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Definitions:

Actuated Hydraulically

Operated or moved by the pressure of a fluid within a hydraulic system.

Double-acting Wheel Cylinder

A hydraulic cylinder in a drum brake system that can apply force in both directions, allowing for more effective brake application.

Single-acting Wheel Cylinders

Hydraulic cylinders in a brake system that exert force in one direction only, commonly used in drum brakes.

Brake Shoes

Components of a drum brake system that press outward against the drum to slow or stop the vehicle.