Which of the Following Statements Is CORRECT

question 39

Multiple Choice

Which of the following statements is CORRECT?

• A) long-term bonds have less interest rate price risk but more reinvestment rate risk than short-term bonds.
• B) if interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less interest rate risk.
• C) 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.
• D) long-term bonds have less interest rate price risk and also less reinvestment rate risk than short-term bonds.
• E) 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.