Which of the following claims is true? a. Long-term bonds have lower interest rate risk than short-term bonds but higher reinvestment rate risk. b. Long-term bonds have higher interest rate exposure and lower reinvestment risk than short-term bonds. c. As compared to coupon-bearing bonds, zero coupon bonds have higher interest rate exposure but lower reinvestment rate risk. d. As interest rates rise, all bond prices rise, although the increase would be greatest for bonds with lower interest rate danger. e. One drawback to zero coupon bonds is that you do not have to incur interest on them before you sell the bond or it matures.
Which of the following claims is true? a. Long-term bonds have lower interest rate risk than short-term bonds but higher reinvestment rate risk. b. Long-term bonds have higher interest rate exposure and lower reinvestment risk than short-term bonds. c. As compared to coupon-bearing bonds, zero coupon bonds have higher interest rate exposure but lower reinvestment rate risk. d. As interest rates rise, all bond prices rise, although the increase would be greatest for bonds with lower interest rate danger. e. One drawback to zero coupon bonds is that you do not have to incur interest on them before you sell the bond or it matures.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Which of the following claims is true?
a. Long-term bonds have lower interest rate risk than short-term bonds but higher reinvestment rate risk.
b. Long-term bonds have higher interest rate exposure and lower reinvestment risk than short-term bonds.
c. As compared to coupon-bearing bonds, zero coupon bonds have higher interest rate exposure but lower reinvestment rate risk.
d. As interest rates rise, all
e. One drawback to zero coupon bonds is that you do not have to incur interest on them before you sell the bond or it matures.
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