Which of the Following Statements Is CORRECT

question 64

Multiple Choice

Which of the following statements is CORRECT?

• A) 10-year,zero coupon bonds have more reinvestment risk than 10-year,10% coupon bonds.
• B) A 10-year,10% coupon bond has less reinvestment risk than a 10-year,5% coupon bond (assuming all else equal).
• C) The total (rate of)return on a bond during a given year is the sum of the coupon interest payments received during the year and the change in the value of the bond from the beginning to the end of the year,divided by the bond's price at the beginning of the year.
• D) The price of a 20-year,10% bond is less sensitive to changes in interest rates than the price of a 5-year,10% bond.
• E) A $1,000 bond with $100 annual interest payments that has 5 years to maturity and is not expected to default would sell at a discount if interest rates were below 9% and at a premium if interest rates were greater than 11%.

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Definitions:

Corporate Espionage

The practice of secretly gathering proprietary or confidential information from competitors or other businesses for competitive advantage.

Sustained Price Cuts

A strategic reduction in the prices of goods or services, maintained over a long period, to attract more customers or gain a competitive advantage.

Anticompetitive Strategies

Practices implemented by businesses to reduce competition, potentially leading to monopolies or unfair market advantages.

Antitrust Legislation

Laws designed to promote competition and regulate monopolistic practices within the marketplace.