The Only Case for Which the Bond Price Does Not

question 27

Multiple Choice

The only case for which the bond price does not react to a change in the yield to maturity is when

• A)the bond is a U.S. Treasury security.
• B)the bond's coupon rate equals its current yield.
• C)the bond's market price equals its par value.
• D)the bond's holding period is the same as the number of years to maturity.

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Definitions:

Defense Mechanism

Psychological strategies unconsciously used by individuals to protect themselves from anxiety and confrontations with unpleasant aspects of reality.

Minority Worker

An employee who belongs to a racial, ethnic, or cultural minority within the broader workforce.

Pleasure Principle

A concept in psychoanalytic theory suggesting that individuals seek pleasure and avoid pain in order to satisfy biological and psychological needs.

Reality Principle

A concept in psychoanalytic theory referring to the ability of the mind to assess the external world and act upon it accordingly, often in contrast to the pleasure principle.