Your uncle would like to restrict his interest rate risk and his default risk, but he would still like to invest in corporate bonds. Which of the possible bonds listed below best satisfies your uncle's criteria?

Question

Quizplus · Accepted Answer

A AAA bond with 5 years to maturity would satisfy your uncle's criteria the best as it has the lowest default risk (due to its high credit rating) and a shorter maturity reduces interest rate risk.

Your Uncle Would Like to Restrict His Interest Rate Risk