Which of the Following Bond Mutual Funds Has Both the Lowest

question 19

Multiple Choice

Which of the following bond mutual funds has both the lowest default risk and interest rate risk?

• A)Short-term Treasury
• B)Long-term Ginnie Mae
• C)Long-term corporate
• D)Short-term high yield

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Definitions:

Discount Rate

In the realm of discounted cash flow analysis, this is the interest rate used for estimating the present value of future financial inflows.

Anticipated Annual Incremental

Expected yearly increases in revenue or benefits as a result of a particular action or investment, not considering future inflation or changes in currency value.

Salvage Value

The anticipated market value of an asset after its period of utility has ended.

Payback Period

The duration required for an investment to produce income or cash flow that matches the investment's initial cost.