Which of the Following Statements About the Relationship Between Interest

question 15

Multiple Choice

Which of the following statements about the relationship between interest rates and bond prices is true?

• A)There is an inverse relationship between bond prices and interest rates, and the price of long-term bonds fluctuates more than the price of short-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
• B)There is an inverse relationship between bond prices and interest rates, and the price of short-term bonds fluctuates more than the price of long-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
• C)There is a direct relationship between bond prices and interest rates, and the price of short-term bonds fluctuates more than the price of long-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
• D)There is a direct relationship between bond prices and interest rates, and the price of long-term bonds fluctuates more than the price of short-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).

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Definitions:

Fixed Assets Management

Fixed assets management involves the accounting and management practices related to the selection, maintenance, inspection, and disposal of fixed assets to maximize their efficiency and value to the business.

Cash Conversion

The process of turning physical goods, services, or other assets into cash, often measuring the efficiency of a company in generating revenue.

Credit Policies

Guidelines set by businesses to determine the terms and conditions for extending credit to customers.

Working Capital Policy

A strategy relating to managing a firm's short-term assets and liabilities with the objective of maintaining sufficient liquidity to carry out operations smoothly.