# Finance

posted by .

Some institutional investors prefer zero coupon bonds over coupon bonds of the same maturity (and same quality). They will ever purchase a lower YTM zero coupon than the same maturity coupon bond. Which statement below best describes why they do this? (Points: 4)
Coupon payments every 6 months can be reinvested in an efficient manner.
Coupon bonds have less reinvestment risk than zero coupon bonds.
zero coupon bond have no reinvestment risk.
This is the best math formula we have; and universally accepted.
All of the above statements are correct.

## Similar Questions

1. ### Finance

Yield to maturity (YTM) is the calculation utilizing the current price of the investment, the coupon cash flows and the par amount at maturity. However, the mathematics of the YTM calculation is virtually wrong or incorrect in the …
2. ### Finance

Bond X is a premium bond making annual payments. The bond pays an 8 percent coupon, has a YTM of 6 percent, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond pays a 6 percent coupon, has a YTM …
3. ### fin 571

(Interest-rate risk) Philadelphia Electric has many bonds trading on the New York Stock Exchange. Suppose PhilElâ€™s bonds have identical coupon rates of 9.125% but that one issue matures in 1 year, one in 7 years, and the third in …
4. ### Finance

Which of the following statements is CORRECT?
5. ### Finance

Which of the following statements is CORRECT?
6. ### economics

The current term-structure of spot interest rates for safe zero-coupon bonds is as follows: Maturity, in years Interest rate(r) 1 8% 2 10% 3 11% 4 12% 5 13% There is a safe bond B which has 4 years before maturity and pays a coupon …
7. ### Math

he current term-structure of spot interest rates for safe zero-coupon bonds is as follows: Maturity, in years Interest rate(r) 1 8% 2 10% 3 11% 4 12% 5 13% There is a safe bond B which has 4 years before maturity and pays a coupon …
8. ### Finance

Which of the following statements about the relationship between yield to maturity and bond prices is FALSE?
9. ### MathematicalModels

A default-free coupon bond maturing in 6 months, that pays a coupon of 2.00 after 3 months and makes a final payment of 102.00 (the last coupon and the principal), trades at 101.00 today. Moreover, a 3-month default-free zero-coupon …
10. ### Mathematical Models

A default-free coupon bond maturing in 6 months, that pays a coupon of 2.00 after 3 months and makes a final payment of 102.00 (the last coupon and the principal), trades at 101.00 today. Moreover, a 6-month default-free zero-coupon …

More Similar Questions