1 which of the following statements about interest rate and, Ask an Expert

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

a. Interest rate (price) risk can be eliminated by holding zero coupon bonds.

b. Variable (or floating) rate securities have less interest rate (price) risk than fixed rate securities.

c. Interest rate risk can never be reduced.

d. Interest rate (price) risk does not exist for floating-rate debt securities because they do not lose value when interest rates rise, while fixed-rate debt securities do not have reinvestment rate risk which is the risk of earning less than expected when interest payments or debt principal are reinvested.

e. Reinvestment rate risk can be eliminated by holding variable (or floating) rate bonds.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92763824

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