Which of the following investments gives the investor the least exposure to reinvestment risk?
A) Treasury notes.
B) Preferred stock in a growth company.
C) Common stock in an electric utility.
D) Treasury STRIPS/zero-coupon bonds.
Answer: Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) are zero-coupon bonds paying no interest. Thus, there is no income to reinvest during the holding period and therefore no reinvestment risk.