Reasons for using a bond ladder strategy include
I. typically higher rates on long-term bonds.
II. uncertainty concerning future interest rates.
III. lower tax rates on bonds held to maturity.
IV. reducing the amount of time spent managing the bond portfolio.

Question

Quizplus · Accepted Answer

A bond ladder strategy involves purchasing bonds with varying maturities, which can provide typically higher rates on long-term bonds (I) and help manage uncertainty concerning future interest rates (II). It also reduces the amount of time spent managing the bond portfolio (IV) by having a systematic approach to reinvestment and diversification. Tax rates on bonds held to maturity (III) are not a reason for using a bond ladder strategy, as tax rates are determined by tax law and not by the investment strategy.

Reasons for Using a Bond Ladder Strategy Include