11.Which of the following is False? a.Bonds backed by an insurance company have zero credit and interest rate risks. b.Counterparty risk is the risk that the counterparty will be unable to live up to its contractual obligations. c.In an OTC call option contract there is considerable concern with counterparty risk because the issuer of the call option may not deliver payments in case of loss. d.Investors in coupon bonds face a reinvestment risk. e.Reinvestment risk for callable bonds is greater than for non-callable bonds, ceteris paribus. Solution The following statement is false: Bonds backed by an insurance company have zero credit and interest rate risks. Insurance companies are in the business of assuming risk for individuals and institutions. They manage those risks by diversifying over a large number of policies, perils and geographic regions. Therefore, it is wrong if we say that there is zero credit and interest rate risks in the Bonds backed by an insurance company..