hard · Certified Financial Planner General Principles
A zero-coupon bond has a maturity of 12 years and a current market price of $440.
If the client's goal is to immunize a future liability exactly 12 years from today, why is this bond the optimal choice?
- Because the lack of coupons eliminates the possibility of default risk over the 12-year period.
- Because the low current price of $440 guarantees a high internal rate of return (IRR) regardless of interest rate changes.
- Because it provides a linear price change estimate that is more accurate than coupon-bearing bonds.
- Because it has no coupon payments to reinvest, its Macaulay Duration is exactly equal to its maturity.
Sign up free to see the explanation and track your rank →
More Certified Financial Planner General Principles practice
- What is the maximum amount that can be sheltered by the annual gift tax exclusion if the p
- For 2026, which portion of their interest is deductible as an itemized deduction?
- The Solis family is concerned about 'Bond Convexity.' If interest rates rise by 2%, what w
- If interest rates rise by 100 basis points, which of the following best describes the expe
- Based on the 2026 Parameter Lock and SECURE 2.0, which statement is correct?
- The Hartwell household is reviewing a bond portfolio. If int… — Which concept explains thi
- Using the 2026 Parameter Lock, what is the maximum amount she can transfer directly from h
- Which of the following is brought back into his gross estate under the 3-year lookback rul