hard · Certified Financial Planner General Principles
The Crowe family is using zero-coupon bonds to fund a specific future liability.
Which of the following is the most accurate reason for this selection in the context of investment planning math?
- The Macaulay Duration of a zero-coupon bond is exactly equal to its maturity.
- The price of the zero-coupon bond will be less sensitive to rate changes than a coupon bond of the same maturity.
- Zero-coupon bonds eliminate interest rate risk over the holding period.
- The Modified Duration will be higher than the Macaulay Duration.
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