Which of the Following Statement Is Incorrect If Interest Rates

question 338

Multiple Choice

Which of the following statement is incorrect if interest rates fall?

• A) Bond prices will rise.
• B) Coupon payments on floating rate bonds will fall.
• C) The percentage price change for long-term bonds will be greater than for short-term bonds.
• D) The percentage price change for low coupon bonds will be greater than for high coupon.
• E) Coupon payments on floating rate bonds will rise.

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Definitions:

Price Index

A statistical measure that shows changes in the price level of a basket of consumer goods and services over time, used to gauge inflation or deflation.

Dollar-Value LIFO

An inventory valuation method that uses the last-in, first-out (LIFO) principle, but accounts for changes in inventory value due to inflation by measuring inventory in dollar amounts rather than units.

Year-End Price

The market price of a stock or any other security on the last trading day of the year.

Price Index

A measure that examines the average change in prices of goods and services over time in an economy.