Which of the Following Is True

question 105

Multiple Choice

Which of the following is true?

• A) Bonds and debentures are two different terms to describe the same instrument.
• B) A bond is a debt security, and a debenture is the agreement between the bondholder and the corporation.
• C) A bond is an instrument that has a maturity of more than five years, and a debenture has a maturity of less than five years.
• D) A bond is a secured instrument, and a debenture is an unsecured instrument.
• E) A debenture is a secured instrument, and a bond is an unsecured instrument.

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Definitions:

Factor Portfolios

Investment portfolios constructed to have a high sensitivity to certain factors or characteristics expected to yield higher returns, such as size, value, or momentum.

Pricing Model

A theoretical approach used to determine the price of a financial instrument or the valuation of a company.

Risk-Free Rate

The risk-free rate is the theoretical rate of return of an investment with zero risk, serving as a benchmark for measuring financial instruments' risk.

Arbitrage Opportunities

The chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another market, earning a risk-free profit.