hard · Certified Financial Planner Retirement
Marlowe is considering the use of zero-coupon bonds to immunize a future liability.
Why are zero-coupon bonds considered the perfect instrument for precise liability immunization?
- They provide a higher yield-to-maturity than coupon-bearing bonds of the same credit quality.
- They eliminate interest rate risk entirely.
- Their Macaulay Duration is exactly equal to their maturity.
- They are exempt from federal income tax if held to maturity.
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