Which of the following statements is CORRECT?
A. Long-term bonds have less interest rate price risk but more reinvestment rate risk than short-term bonds.
B. If interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less interest rate risk.
C. Relative to a coupon-bearing bond with the same maturity, a zero coupon bond has more interest rate price risk but less reinvestment rate risk.
D. Long-term bonds have less interest rate price risk and also less reinvestment rate risk than short-term bonds.
E. One advantage of a zero coupon Treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold.
Answer: C
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