Your son will be ready for college in 10 years and your daughter in 14 years.Which of the following bond strategies would be best suited to your goal of financing your children's education?

Question

Quizplus · Accepted Answer

Maturity matching strategy would be the best option for financing children's education. This strategy involves matching the maturity of the bonds with the time when funds will be required. Since the son will be ready for college in 10 years and the daughter in 14 years, the bonds with maturities closely matching these time frames can be purchased. This will ensure that the principal amount is available when needed, and the bond's interest rate can be reinvested. It reduces the potential for interest rate risk as the bonds will not be sold before the maturity date. Therefore, maturity matching strategy is the best-suited bond strategy for this goal.

Your Son Will Be Ready for College in 10 Years