Asked by Carlos Trejo on Jul 02, 2024
Verified
A life insurance firm wants to minimize its interest rate risk, and it is planning on paying out $250,000 in 5 years. Which one of the following investments best matches its goal?
A) high-yield utility stocks
B) 5-year zero-coupon bonds
C) 10-year coupon bonds
D) money market investments rolled over as needed
Interest Rate Risk
The potential for investment losses due to changes in interest rates.
Zero-Coupon Bonds
Bonds that do not pay periodic interest and are issued at a significant discount to their face value, maturing at par value.
Life Insurance
A contract between an insurer and an insured, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person.
- Recognize investment strategies to minimize interest rate risk.
Verified Answer
Learning Objectives
- Recognize investment strategies to minimize interest rate risk.
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