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Topic: Business
Number of pages / Number of words: 6 / 1488
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This is another reason why there is practically no risk for reinvestment.

Liquidity

Liquidity poses as a benefit for zero coupon bonds because of the demand for them in an active secondary market. Because of zeros active secondary market, it allows investors to sell the bonds prior to maturity. As with most fixed income investments, the value of zeros sold prior to maturity will vary depending on current interest rates...


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As with most fixed income investments, the value of zeros sold prior to maturity will vary depending on current interest rates. Since we know that zero coupon bonds are so much more volatile than other bonds with similar maturities, the volatility tends to favorably affect the value of zeros in a declining interest rate environment...


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