If a Bond for Alexcorp Has a 10% Rate of Return

question 261

Multiple Choice

If a bond for Alexcorp has a 10% rate of return and an otherwise identical bond for Tylercorp has a 15% rate of return, which bond carries greater risk?

• A) The Alexcorp bond is riskier.
• B) The Tylercorp bond is riskier.
• C) The two bonds are equally risky.
• D) It is impossible to calculate the riskiness of the bonds.

---

Definitions:

Market Rate of Return

The average annual return generated from a market or a specific investment over a specific period, often considered a benchmark.

Annual Dividend

The total payment a company makes to its shareholders out of its profits over the course of a year.

Dividend Growing

A situation where a company consistently increases the amount of dividends paid to shareholders over time.

EPS Growth Rate

The annual percentage change in earnings per share, indicating the rate at which a company's profit per share is growing.