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:

Minimum Intensity

The lowest level of stimulus intensity required to produce a detectable response or result.

Neurotransmitters

Chemicals that transmit signals across a synapse from one neuron to another in the nervous system.

Neuron-produced Chemicals

Chemicals, such as neurotransmitters, that are produced by neurons to transmit signals across the synapse to another neuron.

All-or-none Response

A principle that states a neuron fires with the same potency each time, although frequency can vary; it either fires or doesn't.