Which of the Following Statements Is CORRECT

question 14

Multiple Choice

Which of the following statements is CORRECT?

• A)The yield to maturity for a coupon bond that sells at a premium consists entirely of a positive capital gains yield; it has a zero current interest yield.
• B)The market value of a bond will always approach its par value as its maturity date approaches.This holds true even if the firm has filed for bankruptcy.
• C)Rising inflation makes the actual yield to maturity on a bond greater than a quoted yield to maturity that is based on market prices.
• D)The yield to maturity on a coupon bond that sells at its par value consists entirely of a current interest yield; it has a zero expected capital gains yield.
• E)On an expected yield basis, the expected capital gains yield will always be positive because an investor would not purchase a bond with an expected capital loss.

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Definitions:

Units-of-activity Method

A depreciation method that allocates the cost of an asset over its useful life based on units of production or use, rather than passage of time.

Straight-line Method

A method of calculating depreciation by evenly allocating the cost of an asset over its estimated useful life.

Salvage Value

The expected residual valuation of an asset at the conclusion of its operational life, commonly included in the calculations for depreciation.

Depreciation

The accounting process of allocating the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.