Which of the Following Are Generally True of Bonds

question 96

Multiple Choice

Which of the following are generally true of bonds?

• A) The only bond whose return equals the initial yield to maturity is one whose time to maturity is the same as the holding period.
• B) A rise in interest rates is associated with a fall in bond prices, resulting in capital gains on bonds whose terms to maturity are longer than the holding periods.
• C) The longer a bond's maturity, the smaller is the size of the price change associated with an interest rate change.
• D) Prices and returns for short-term bonds are more volatile than those for longer-term bonds.

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Definitions:

Payables Deferral Period

The time duration a company takes to pay off its suppliers after a purchase has been made, indicating how well the company manages its cash outflow.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable, and inventories, and meeting other short-term liabilities.

Flotation Cost

The expenses incurred when a company issues new securities, including underwriting fees, legal fees, and registration fees.

Corporate Tax Rate

The corporate tax rate is the percentage of a corporation's income that is seized by the government as tax.