The bond which is used as insurer to protect investors against the interest rate risk, is classified as ___________?
Correct answer: B. zero coupon treasury bonds
- A. zero coupon treasury notes
- B. zero coupon treasury bonds
- C. One payment bonds
- D. zero treasurer bonds
Explanation
Zero-coupon Treasury bonds provide a fixed amount at maturity and do not require reinvestment of periodic coupon payments, helping protect a held-to-maturity investor from reinvestment-rate changes. Treasury notes pay coupons and therefore do not provide the same feature.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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