Holding Other Factors Constant, the Interest-Rate Risk of a Coupon

question 65

Multiple Choice

Holding other factors constant, the interest-rate risk of a coupon bond is higher when the bond's

• A) term to maturity is lower.
• B) coupon rate is lower.
• C) yield to maturity is higher.
• D) term to maturity is lower and yield to maturity is higher.
• E) None of the options are correct.

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Definitions:

Price Lining

Grouping product prices into ranges, such as low-, medium-, and high-priced items.

Pricing Tactic

Strategic approaches used to set prices for products or services to achieve business objectives.

Prestige Pricing

Psychological pricing strategy used with goods whose quality is difficult to determine by inspection or for products about which consumers have little solid information.

Price Skimming

Setting the price of a new product higher than expected to recover development costs.