Which of the following bonds is not subject to reinvestment risk?

Which of the following bonds is NOT subject to reinvestment risk? Since they do not pay semiannual interest, zero coupon bonds have no reinvestment risk regardless of their purchase price.

Which security is most subject to reinvestment risk?

Callable bonds are especially vulnerable to reinvestment risk because these bonds are typically redeemed when interest rates decline. Methods to mitigate reinvestment risk include the use of non-callable bonds, zero-coupon instruments, long-term securities, bond ladders, and actively managed bond funds.

Which risk is avoided when making an investment in a GNMA pass through certificate?

Which risk is avoided when making an investment in a GNMA pass-through certificate? Because a GNMA (Ginnie Mae) pass through certificate is guaranteed by the U.S. Government, it has no credit risk.

Which security does not earn interest?

Treasury bonds typically have par values of $10,000 and are sold on auction on TreasuryDirect. Short-term fixed-income securities include Treasury bills. The T-bill matures within one year from issuance and doesn’t pay interest.

Which investment has the lowest level of reinvestment risk?

Short-term investments have minimal reinvestment risk; and zero-coupon obligations have no reinvestment risk.

What affects reinvestment risk?

Reinvestment risk is more likely when interest rates are declining. For example, falling interest rates may prevent bond coupon payments from earning the same rate of return as the original bond. Pension funds are also subject to reinvestment risk.

What are fixed interest investments?

A type of investment that offers a set rate of interest for a specified amount of time, with the principal repaid at maturity. Covers a broad range of investments, with varying degrees of risk, such as term deposits, government bonds, corporate bonds, capital notes, debentures and income securities.

What are fixed income investments?

Fixed income is an investment approach focused on preservation of capital and income. It typically includes investments like government and corporate bonds, CDs and money market funds. Fixed income can offer a steady stream of income with less risk than stocks.

What are equities investments?

An equity investment is money that is invested in a company by purchasing shares of that company in the stock market. These shares are typically traded on a stock exchange.

What are 4 types of investments?

There are four main investment types, or asset classes, that you can choose from, each with distinct characteristics, risks and benefits.
  • Growth investments. …
  • Shares. …
  • Property. …
  • Defensive investments. …
  • Cash. …
  • Fixed interest.

What are examples of fixed investments?

Common fixed income investments include Treasury bonds, government and agency bonds, municipal bonds, corporate bonds, and mortgage-backed securities, as well as certificates of deposit and preferred stock or securities.

What is a good rate of return for investment?

A good return on investment is generally considered to be about 7% per year. This is the barometer that investors often use based off the historical average return of the S&P 500 after adjusting for inflation.

What are the 3 types of investments?

There are three main types of investments:
  • Stocks.
  • Bonds.
  • Cash equivalent.

What is types of investment?

There are various types of investments: stocks, bonds, mutual funds, index funds, exchange-traded funds (ETFs) and options. … Investments are generally bucketed into three major categories: stocks, bonds and cash equivalents. There are many different types of investments within each bucket.

What are four types of investments you should avoid?

4 Types of Investments to Avoid
  • Your Buddy’s Business.
  • The Speculative Get Rich Quick Scheme.
  • The MLM With a Pricey Buy-In.
  • Individual Stocks.
  • What to Do When Tempted to Speculate.

What are the 8 types of investment?

Eight types of saving and investment options include savings accounts, stocks, certificates of deposits, bonds, mutual funds, real estate, commodities and annuities.

What are the advantages and disadvantages of investment?

Advantages for investors include advanced portfolio management, dividend reinvestment, risk reduction, convenience, and fair pricing. Disadvantages include high fees, tax inefficiency, poor trade execution, and the potential for management abuses.