Consider the three bonds in the following table. W
Consider the three bonds in the following table. Which of the three bonds is most likely to have the greatest reinvestment risk?
A. Bond A
B. Bond B
C. Bond C
参考解答
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2024-11-17 18:52:25
Ans:C
The yield to maturity assumes the coupon payments are reinvested at the yield to maturity and the bond will be held until maturity.
The bond selling at a premium has the highest coupon rate and thus is expected to earn the most reinvestment income.
If the reinvestment rate falls, this bond will suffer the greatest loss.
Therefore Bond C, which is currently selling at premium, is most likely to have the greatest reinvestment risk.
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