Fixed Income Q79

0. Holding all other characteristics the same, the bond exposed to the lowest level of reinvestment risk is most likely the one selling at:

  • Option : C
  • Explanation : A bond selling at a discount has a lower coupon rate. All else being equal, bonds with lower coupon rates have lower reinvestment risk. The reason is that the lower the coupon rate, the less dependent the bond's total dollar return will be on the reinvestment of the coupon payments in order to produce the yield to maturity at the time of purchase.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *