Which of the Following Statements Is CORRECT

question 53

Multiple Choice

Which of the following statements is CORRECT?

• 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.
• E) Long-term bonds have less interest rate price risk and also less
• Reinvestment rate risk than short-term bonds.

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