Which Statement Regarding Interest Rate Risk Is True

question 16

Multiple Choice

Which statement regarding interest rate risk is true?

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

---

Definitions:

Repress Memories

The psychological defense mechanism where an individual unconsciously blocks out memories that are too traumatic or stressful to confront.

Schemas

Cognitive structures or frameworks that help organize and interpret information, allowing individuals to understand and predict the world around them.

Flashbulb Memories

Vivid and detailed memories of significant or emotional events that feel as if they were recorded by a camera.