Which of the Following Bonds Carries the Greatest Amount of Interest

question 75

Multiple Choice

Which of the following bonds carries the greatest amount of interest rate risk?

• A) A 7%, 3-year bond
• B) A 5%, 12-year bond
• C) A 2%, 25-year bond
• D) A 25%, 1-year bond
• E) A 4%, 9-year bond

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Definitions:

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash from operating activities.

Net Income

The total earnings of a company after deducting all expenses, taxes, and losses, indicating the profit made during a specific period.

Operating Activities

Activities directly related to the operation of the business, including production, sales, and day-to-day business management.

FASB

The Financial Accounting Standards Board is an independent organization responsible for establishing and improving financial accounting and reporting standards in the United States.