Products & RisksPregunta 43 de 125
Reinvestment risk is most significant for an investor who:
a.Holds a zero-coupon bond to maturity
b.Owns common stock paying no dividend
c.Owns high-coupon bonds and must reinvest the periodic interest at prevailing rates
d.Holds cash in a checking account
Explicación
Reinvestment risk is the danger that periodic cash flows (coupons or called principal) must be reinvested at lower prevailing rates, reducing overall return. High-coupon and callable bonds are especially exposed. A zero-coupon bond held to maturity has no interim cash flows to reinvest, so it avoids this risk.
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