Two amortizing bonds have the same maturity date a
Two amortizing bonds have the same maturity date and same yield to maturity. The reinvestment risk for an investor holding the bonds to maturity is greatestfor the bond that is:
A.a coupon bond selling at a discount to par as a result of market yields increasing after the bond was issued.
B.a zero-coupon bond.
C.a coupon bond selling at a premium to par.
参考解答
4j8***102
2024-11-14 20:14:24
Ans:C;
Reinvestment risk refers to the risk that interest rates will decline causing the future income expected from reinvesting coupon payments to decline. The higher the coupon being paid, the greater the reinvestment risk.
Because the two amortizing bonds have the same maturity date and the same yield to maturity, the bond selling at a premium must have a higher coupon rate and a higher amount requiring reinvestment and thus higher reinvestment risk.
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