Which of the Following Statements Is CORRECT

question 72

Multiple Choice

Which of the following statements is CORRECT?

• A) The total return on a bond during a given year is based only on the coupon interest payments received.
• B) All else equal,a bond that has a coupon rate of 10% will sell at a discount if the required return for bonds of similar risk is 8%.
• C) The price of a discount bond will increase over time,assuming that the bond's yield to maturity remains constant.
• D) For a given firm,its debentures are likely to have a lower yield to maturity than its mortgage bonds.
• E) When large firms are in financial distress,they are almost always liquidated,whereas smaller firms are generally reorganized.

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Definitions:

Public Good

A product or service that is non-excludable and non-rivalrous, meaning it can be consumed by multiple people without diminishing its availability to others.

Common Resource

A resource that is nonexcludable but rival in consumption.

Nonexcludable

A characteristic of a good or service that prevents people from being excluded from using it, often leading to challenges in private market provision.

Rival In Consumption

Goods or services that cannot be enjoyed by more than one person at the same time, as the consumption by one prevents that by another.