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:

Exxon Valdez

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Conservatives

Political individuals or groups advocating for tradition, resistance to radical change, and the preservation of established institutions.

David Souter

A retired Associate Justice of the Supreme Court of the United States, known for his moderate to liberal viewpoints during his tenure from 1990 to 2009.

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An influential Associate Justice of the U.S. Supreme Court, known for his progressive views and serving from 1956 to 1990.