SIE (Securities Industry Essentials) Practice Exam

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Reinvestment risk is least present in which investment?

Zero coupon Treasury Bond
Corporate bonds
Variable rate mortgages
Dividend-paying stocks

The correct answer is: Zero coupon Treasury Bond

Explanation The other options may carry more risk due to potential changes in bond ratings, fluctuations in interest rates, or changes in stock prices. Unlike zero coupon Treasury Bonds which have a fixed interest rate and maturity date, the other options are subject to changes that could result in a higher level of risk. Furthermore, zero coupon Treasury Bonds are backed by the federal government, making them less risky compared to other investment options.