Investment VehiclesQuestion 32 of 110
Which bond carries the greatest interest rate risk, all else equal?
a.A 2-year bond with a high coupon
b.A 5-year bond with a high coupon
c.A 5-year zero-coupon bond
d.A 30-year zero-coupon bond
Explanation
Interest rate risk increases with longer maturity and lower coupons, both of which lengthen duration. A 30-year zero-coupon bond has the longest duration and thus the greatest price sensitivity to rate changes. Shorter maturities and higher coupons reduce that sensitivity.
Practice all 110 questions free — no signup required.
Related questions on this topic
- Which of the following best describes a zero-coupon bond?
- A hedge fund is typically offered to which type of investor and under what structure?
- A real estate investment trust (REIT) must generally distribute what portion of its taxable income to shareholders to maintain favorable tax treatment?
- A convertible bond gives the holder the right to:
- Commercial paper is best described as which of the following?
- An American Depositary Receipt (ADR) allows a U.S. investor to do which of the following?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against NASAA Series 65 Investment Adviser Law Exam · How we review