Which of the Following Statements Is CORRECT

question 13

Multiple Choice

Which of the following statements is CORRECT?

• A) The time to maturity does not affect the change in the value of a bond in response to a given change in interest rates.
• B) You hold two bonds.One is a 10-year, zero coupon, bond and the other is a 10-year bond that pays a 6% annual coupon.The same market rate, 6%, applies to both bonds.If the market rate rises from the current level, the zero coupon bond will experience the smaller percentage decline.
• C) The shorter the time to maturity, the greater the change in the value of a bond in response to a given change in interest rates.
• D) The longer the time to maturity, the smaller the change in the value of a bond in response to a given change in interest rates.
• E) You hold two bonds.One is a 10-year, zero coupon, issue and the other is a 10-year bond that pays a 6% annual coupon.The same market rate, 6%, applies to both bonds.If the market rate rises from the current level, the zero coupon bond will experience the larger percentage decline.

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Definitions:

Specific Performance

A legal remedy requiring a party to perform their part of a contract, rather than paying damages for not fulfilling the contract.

Computer Program

A computer program is a set of instructions that a computer follows to perform specific tasks or operations, written in a programming language.

Indemnification

The act of compensating for loss or damage, often seen in contracts where one party agrees to protect the other against certain future claims or liabilities.

Negligently

Acting with a lack of proper care or attention to duties, resulting in harm or damage to others.