SIE Understanding Products and Their Risks Practice Question 6

Correct Answer: D

Explanation:

D: Eliminating reinvestment risk is the benefit of constant reinvestment of interest because no payments are made prior to maturity. Choice A is incorrect because their price typically increases when the Federal Reserve cuts rates. Choice B is incorrect because it will have an increasing price responsiveness to interest rate changes as the term to maturity increases. Choice C is incorrect because it makes no interest payments prior to maturity.