Which One of the Following Statements Correctly Describes the Major

question 121

Multiple Choice

Which one of the following statements correctly describes the major drawback of a zero- coupon bond?

• A) Unless the bond is held in a tax-sheltered account, the investor must pay taxes on the annual accrued interest even though no interest is actually received.
• B) The conversion feature found on most zero-coupon bonds generally requires the investor to switch to a coupon-bearing bond after a period of 5 years.
• C) The lack of an annual coupon basically prohibits the investor from locking in a high rate of return.
• D) Because there is no reinvestment of a coupon payment, large capital losses accrue when interest rates decline.

---

Definitions:

Validating

The process of recognizing and affirming the validity of another person's feelings, thoughts, or behaviors as understandable.

Personality Questionnaire

A tool or test used to assess and evaluate an individual's character traits and personality attributes.

Correlate

To have a mutual relationship or connection between two or more things, where one can be related to or affect the other.

Trait Approach

A perspective in psychology focused on identifying, describing, and measuring individual characteristics and differences in personality.