Interest rate risk is best minimized by purchasing municipal:

The correct answer remains short maturities because interest rate risk is primarily driven by how sensitive a bond’s price is to changes in market interest rates. Municipal securities with shorter maturities generally have lower duration and less price volatility than long-term municipal bonds. If rates rise, the prices of outstanding bonds decline, but short-term bonds usually decline less because their cash flows and principal repayment occur sooner. Choice C is correct. A revenue bond may have project-specific credit characteristics, but it does not inherently reduce interest-rate sensitivity. A discount bond can still decline in value if rates rise, particularly if it has a long maturity. A high-yield municipal issue may expose the investor to greater credit risk, call risk, liquidity risk, or maturity risk, and is not a conservative way to reduce rate risk. The SIE outline covers municipal securities, debt maturities, yield, and the price-interest-rate relationship. It also separately identifies interest-rate risk and risk mitigation. This question tests the fixed-income principle that shorter maturity is the standard method of reducing interest-rate exposure. Reference: Section 2.1.2 Debt Instruments; Section 2.2 Investment Risks.