Which of the Following Statements Is CORRECT

question 38

Multiple Choice

Which of the following statements is CORRECT?

• A) If a bond is selling at a discount to par,its current yield will be greater than its yield to maturity.
• B) All else equal,bonds with longer maturities have less price risk than bonds with shorter maturities.
• C) If a bond is selling at its par value,its current yield equals its capital gains yield.
• D) If a bond is selling at a premium,its current yield will be less than its capital gains yield.
• E) All else equal,bonds with larger coupons have less price risk than bonds with smaller coupons.

---

Definitions:

Opportunity Cost

The revenue that is foregone from an alternative use of an asset, such as cash.

Make-Or-Buy Options

The decision-making process where a company chooses between manufacturing a product in-house or purchasing it from an external supplier.

Differential Revenue

The difference in revenue generated under two different scenarios or choices.

Differential Revenue

The difference in revenue generated from two different business decisions, often used in managerial accounting to assess alternatives.