One advantage of a zero coupon treasury

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-Which of the following statements is CORRECT? Explain why each answer is incorrect and why the correct answer is correct.

-One advantage of a zero coupon Treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold.

-Long-term bonds have less price risk but more reinvestment risk than short-term bonds.

-If interest rates increase, all bond prices will decrease, but the decrease will be greater for bonds that have greater price risk.

-Relative to a coupon-bearing bond with the same maturity, a zero coupon bond has less price risk but more reinvestment risk.

-Long-term bonds have less price risk and also less reinvestment risk than short-term bonds.

Reference no: EM133072184

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