What Happens to the Price of a Bond with a $100

question 24

Multiple Choice

What happens to the price of a bond with a $100 face value and an infinite maturity date when interest rates rise from 5 percent to 10 percent and the coupon paid on the bond is $20?

• A)The price falls by $100.
• B)The price rises by $200.
• C)The price rises by $100.
• D)The price falls by $1.
• E)The price falls by $200.

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Definitions:

Cash-Out Combinations

Business transactions where shareholders of a company being acquired or merged are paid in cash instead of receiving shares of the acquiring or merging entity.

Minority Shareholders

Shareholders who own a smaller portion of a company's shares and typically do not have controlling interests or significant influence on business decisions.

Oppressive Acts

Behaviors or actions by directors or majority shareholders in a corporation that are burdensome, harsh, or wrongful against minority shareholders.

Directors

Members of a company's board of directors, who are elected to oversee and guide the management and policies of the corporation, representing the interests of the shareholders.