Which of the Following Statements Is CORRECT

question 56

Multiple Choice

Which of the following statements is CORRECT?

• A)If a 10-year, $1,000 par, zero coupon bond were issued at a price that gave investors a 10% yield to maturity, and if interest rates then dropped to the point where rd = YTM = 5%, the bond would sell at a premium over its $1,000 par value.
• B)If a 10-year, $1,000 par, 10% coupon bond were issued at par, and if interest rates then dropped to the point where rd = YTM = 5%, we could be sure that the bond would sell at a premium above its $1,000 par value.
• C)Other things held constant, a corporation would rather issue noncallable bonds than callable bonds.
• D)Other things held constant, a callable bond would have a lower required rate of return than a noncallable bond.
• E)Reinvestment rate risk is worse from an investor's standpoint than interest rate price risk if the investor has a short investment time horizon.

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Definitions:

Social Readjustment Rating Scale

A scale that measures the amount of stress in a person's life resulting from major life changes or adjustments.

Approach-avoidance

A conflict or situation where a single goal or option has both appealing and negative aspects to it, leading to ambivalence.

Social Readjustment Rating Scale

A scale that measures the stress levels of different life events to predict their impact on an individual's health.

Inherently Stressful

Referring to situations, tasks, or conditions that are naturally predisposed to causing stress or tension.