SIE Exam Practice Question 670
Question: 670
Which of the following is/are correct regarding a bond's coupon rate?
(1) The smaller a bond's coupon, the greater its relative price fluctuation.
(2) The smaller a bond's coupon, the greater its reinvestment risk.
Correct Answer: A
Explanation:
The smaller a bond's coupon, the greater its relative price fluctuation. The smaller a bond's coupon, the lower its reinvestment risk.
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