Rank the Following Bonds, from Highest to Lowest Interest Rate

question 88

Multiple Choice

Rank the following bonds, from highest to lowest interest rate risk: 2-year zero-coupon, 2-year 5 percent coupon bond, 30-year 5 percent coupon bond, 30-year, zero-coupon bond.

• A)30-year, zero-coupon bond, 30-year 5 percent coupon bond, 2-year 5 percent coupon bond, 2-year zero-coupon bond
• B)2-year 5 percent coupon bond, 2-year zero-coupon bond, 30-year 5 percent coupon bond, 30-year zero-coupon bond
• C)30-year, zero-coupon bond, 30-year 5 percent coupon bond, 2-year zero-coupon bond, 2-year 5 percent coupon bond
• D)30-year, 5 percent coupon bond, 30-year zero-coupon bond, 2-year 5 percent coupon bond, 2-year zero-coupon bond

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Definitions:

Money Market Accounts

Interest-bearing accounts offered by financial institutions, combining the benefits of both savings and checking accounts, typically with higher interest rates.

Commercial Paper

An unsecured, short-term debt instrument issued by companies to finance their operational expenses.

U.S. Treasury Bills

Short-term government securities issued by the U.S. Treasury with a maturity of one year or less, often used as a risk-free investment option.

Sarbanes-Oxley

A U.S. law enacted in 2002 aimed at protecting investors from fraudulent financial reporting by corporations, enhancing corporate governance and accountability.