Which of the Following Statements About Interest Rate and Reinvestment

question 3

Multiple Choice

Which of the following statements about interest rate and reinvestment rate risk is CORRECT?

• A) Interest rate price risk exists because fixed-rate debt securities lose value when interest rates rise, while reinvestment rate risk is the risk of earning less than expected when interest payments or debt principal are reinvested.
• B) Interest rate price risk can be eliminated by holding zero coupon bonds.
• C) Reinvestment rate risk can be eliminated by holding variable (or floating) rate bonds.
• D) Interest rate risk can never be reduced.
• E) Variable (or floating) rate securities have more interest rate (price) risk than fixed rate securities.

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Definitions:

Passive Artificial Immunity

Immunity acquired by the transfer of antibodies from another individual, as through injection or from mother to fetus across the placenta.

Adaptive Immunity

The branch of the immune system that involves the creation of antibodies and memory cells in response to an exposure to a specific pathogen, providing long-term immunity.

Immediate Protection

Rapid defense mechanisms activated promptly to prevent infection or damage before long-term specific immunity develops.

Natural Killer Cell

A type of lymphocyte in the immune system capable of killing certain infectious organisms and tumor cells without prior immunization.