Which of the Following Statements Is FALSE

question 26

Multiple Choice

Which of the following statements is FALSE?

• A)Bond prices converge to the bond's face value due to the time effect,but simultaneously move up and down due to unpredictable changes in bond yields.
• B)As interest rates and bond yields fall,bond prices will rise.
• C)Bonds with higher coupon rates are more sensitive to interest rate changes.
• D)Shorter maturity zero-coupon bonds are less sensitive to changes in interest rates than are longer-term zero-coupon bonds.

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Definitions:

Regulatory Capture Effect

A situation where regulatory agencies are dominated by the industries or interests they are charged with regulating, leading to favorable policies for the regulated entities.

Principal-Agent Problem

A situation in which there is a conflict of interest between a principal (such as an owner) and an agent (such as a manager), because the agent may not act in the best interest of the principal.

Negative Externalities

Costs suffered by a third party as a result of an economic transaction they were not involved in, such as pollution.

Unethical And Illegal Behavior

Actions that are morally wrong and prohibited by law, ranging from fraud and corruption to violations of human rights.