Which of the Following Statements Is NOT CORRECT

question 5

Multiple Choice

Which of the following statements is NOT CORRECT?

• A)If a bond is selling at a discount to par, its current yield will be less than its yield to maturity.
• B)All else equal, bonds with longer maturities have more interest rate (price) risk than bonds with shorter maturities.
• C)If a bond is selling at its par value, its current yield equals its yield to maturity.
• D)If a bond is selling at a premium, its current yield will be greater than its yield to maturity.
• E)All else equal, bonds with larger coupons have greater interest rate (price) risk than bonds with smaller coupons.

---

Definitions:

Decision Making

The cognitive process of selecting a course of action from among multiple alternatives.

Efficient Market Hypothesis

A theory that suggests all existing information is fully reflected in stock prices, implying that stocks always trade at their fair value.

Firm-specific Variables

Factors that affect an individual company's stock price, operational efficiency, profitability, and risk profile, distinct from market-wide influences.

Analytical Review Procedures

Financial analysis techniques used in auditing to assess the reasonableness of account balances and fluctuations.