Which of the Following Statements Best Describes Interest Rate Risk

question 93

Multiple Choice

Which of the following statements best describes interest rate risk?

• 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.

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