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Please explain answer. Option 1 is incorrect

Please explain answer. Option 1 is incorrect

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please explain answer. Option 1 is incorrect. 

**Question 24:** **Which of the following statements is correct?** - **Shorter term securities have less reinvestment risk** (selected) - Higher coupon securities have less reinvestment risk - Both b and c - Longer term securities have less reinvestment risk **Explanation:** This question focuses on reinvestment risk, which refers to the risk of having to reinvest proceeds at a lower interest rate. The document indicates that "Shorter term securities have less reinvestment risk," meaning that securities with shorter maturities are less exposed to the risk of fluctuating interest rates compared to those with longer maturities. Other options are provided for comparison, but they are not selected.
Transcribed Image Text:**Question 24:** **Which of the following statements is correct?** - **Shorter term securities have less reinvestment risk** (selected) - Higher coupon securities have less reinvestment risk - Both b and c - Longer term securities have less reinvestment risk **Explanation:** This question focuses on reinvestment risk, which refers to the risk of having to reinvest proceeds at a lower interest rate. The document indicates that "Shorter term securities have less reinvestment risk," meaning that securities with shorter maturities are less exposed to the risk of fluctuating interest rates compared to those with longer maturities. Other options are provided for comparison, but they are not selected.
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