SIE Exam Practice Question 802

Question: 802

Which of the following are characteristics of a zero-coupon bond?

(1) It does not make periodic interest payments throughout the term of the bond.

(2) It has significant reinvestment risk because no payments are made until the bond matures.

(3) It requires taxes to be paid on accrued interest each year, even though no interest is received.

(4) The duration of a zero-coupon bond is less than its term to maturity.

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