The Option Adjusted Duration Will Approach the Duration to Maturity,when

question 100

Multiple Choice

The option adjusted duration will approach the duration to maturity,when

• A) Interest rates are significantly above the coupon rate because the option has very little chance of being called, and the call option will have very little value.
• B) Interest rates are significantly below the coupon rate because the option has very little chance of being called, and the call option will have very little value.
• C) Interest rates are significantly above the coupon rate because the option has a high chance of being called, and the call option will have significant value.
• D) Interest rates are significantly below the coupon rate because the option has a high chance of being called, and the call option will have significant value.
• E) None of the above.

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Definitions:

Merchandise Inventories

Goods that a company holds for the purpose of sale in the ordinary course of business, including finished products, work in progress, and raw materials.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor expenses.

Monthly Expenses

Recurring costs or outlays that occur every month, such as rent, utilities, payroll, and other operational charges.

Master Budget

A comprehensive financial plan that includes both operational and financial budgets, representing a company’s overall plan of action for a future period.