Which of the Following Statements Best Describes Reinvestment Rate Risk

question 12

Multiple Choice

Which of the following statements best describes reinvestment rate risk?

• A) All else equal, high-coupon bonds have less reinvestment rate risk than low-coupon bonds.
• B) All else equal, low-coupon bonds have less interest rate price risk than high-coupon bonds.
• C) All else equal, short-term bonds have less reinvestment rate risk than long-term bonds.
• D) All else equal, long-term bonds have less reinvestment rate risk than short-term bonds.

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Definitions:

MR

An abbreviation for Marginal Revenue, which refers to the additional revenue earned by selling one more unit of a good or service.

MC

Stands for Marginal Cost, which is the increase in total cost that arises from producing one additional unit of a good or service.

Product Differentiation

A marketing strategy that involves distinguishing a product or service from others, to make it more attractive to a particular target market.

Marginal Revenue

The increase in earnings a business gets by selling one extra unit of its goods or services.