Which of the Following Statements Is CORRECT

question 83

Multiple Choice

Which of the following statements is CORRECT?

• A) Long-term bonds have less interest rate price risk but more reinvestment rate risk than short-term bonds.
• B) If interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less interest rate risk.
• C) Relative to a coupon-bearing bond with the same maturity, a zero coupon bond has more interest rate price risk but less reinvestment rate risk.
• D) Long-term bonds have less interest rate price risk and also less reinvestment rate risk than short-term bonds.
• E) One advantage of a zero coupon Treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold.

---

Definitions:

Contribution Margin

The amount by which sales revenue exceeds variable costs, contributing towards fixed costs and profit.

Selling Price

The amount of money charged to customers for a product or service, determined by factors like cost, market demand, and competition.

Break-even Sales

The amount of revenue from sales that is exactly sufficient to cover all fixed and variable expenses, resulting in zero profit or loss.

Break-even Point

The point at which total expenses match total income, leading to neither a loss nor a profit.