You Are Considering Three Different Bonds for Your Portfolio

question 5

Multiple Choice

You are considering three different bonds for your portfolio.Each bond has a 10-year maturity and a yield to maturity of 10%.Bond X has an 8% annual coupon, Bond Y has a 10% annual coupon, and Bond Z has a 12% annual coupon.Which of the following statements is CORRECT?

• A) Bond X has the greatest reinvestment rate risk.
• B) If market interest rates decline, all of the bonds will have an increase in price, and Bond Z will have the largest percentage increase in price.
• C) If market interest rates remain at 10%, Bond Z's price will be 10% higher one year from today.
• D) If market interest rates increase, Bond X's price will increase, Bond Z's price will decline, and Bond Y's price will remain the same.
• E) If the bonds' market interest rates remain at 10%, Bond Z's price will be lower one year from now than it is today.

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Definitions:

Elimination Of Prejudice

The process of removing biases or preconceived notions against people or groups.

Ingroup Favoritism

The tendency to favor members of one's own group over those in other groups in terms of trust, liking, and resource allocation.

Stereotyping

The act of assigning generalized attributes to an individual or group based on perceived membership in a certain category or social group.

Stigma By Association

The prejudice and discrimination that individuals experience as a result of being closely connected to a stigmatized person or group.