Which of the Following Statements Is FALSE

question 57

Multiple Choice

Which of the following statements is FALSE?

• A) The yield to call (YTC) is the annual yield of a callable bond assuming that the bond is called at the earliest opportunity.
• B) Because the price of a callable bond is higher than the price of an otherwise identical non-callable bond, the yield to maturity of a callable bond will be lower than the yield to maturity for its non-callable counterpart.
• C) The assumption that underlies the yield calculation of a callable bond-that it will not be called-is not always realistic, so bond traders often quote the yield to call.
• D) We can think of the yield to maturity of a callable bond as the interest rate the bondholder receives if the bond is not called and repaid in full.

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Definitions:

Marginal Benefits

The further satisfaction or benefit realized from consuming one more unit of a good or service.

Majority Vote

A decision-making process where the choice receiving more than half of the votes wins.

Recreation Center

A facility that provides a variety of physical and social activities designed for enjoyment, relaxation, and the physical health of the community.

Logrolling

The act of trading support, particularly within the political arena, through mutual agreement to vote for each other's proposed bills.