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Which one of the following statements correctly describes the major drawback of a zero-coupon bond?

kitkat867

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Which one of the following statements correctly describes the major drawback of a zero-coupon bond?

Which one of the following statements correctly describes the major drawback of a zero-coupon bond?

▸ Unless the bond is held in a tax-sheltered account, the investor must pay taxes on the annual accrued interest even though no interest is actually received.

▸ The conversion feature found on most zero-coupon bonds generally requires the investor to switch to a coupon-bearing bond after a period of 5 years.

▸ The lack of an annual coupon basically prohibits the investor from locking in a high rate of return.

▸ Because there is no reinvestment of a coupon payment, large capital losses accrue when interest rates decline.

Textbook

Fundamentals of Investing

Fundamentals of Investing

Edition: 14^th

Authors: Zutter, Smart

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kitkat867 Author

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2 years ago

Just got PERFECT on my quiz

mambah4

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Smart ... Thanks!

my2redeyes

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Thanks

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