Government Bonds
An investor concerned about reinvestment risk should consider which of the following Treasury securities?
Zero-coupon bonds (STRIPS) = NO reinvestment risk. No coupons = nothing to reinvest.
Complete Analysis & Legal Rationale
Treasury STRIPS (zero-coupon bonds) have no reinvestment risk because they make no periodic interest payments. The investor receives only the face value at maturity, eliminating the need to reinvest coupon payments at potentially lower rates. All coupon-paying securities have reinvestment risk.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Semi-annual coupons create reinvestment risk as payments must be reinvested.
Matches the verified teaching point in the explanation.
Long-term bonds with coupons have significant reinvestment risk over 30 years.
TIPS still pay semi-annual interest that must be reinvested.
Official Standard: Primary reference for Treasury bills/notes/bonds/STRIPS characteristics (verify current Treasury materials).
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.