Which of the Following Statements Is Most Correct

question 45

Multiple Choice

Which of the following statements is most correct?

• A) Other things held constant, a callable bond would have a lower required rate of return than a noncallable bond.
• B) Other things held constant, a corporation would rather issue noncallable bonds than callable bonds.
• C) Reinvestment rate risk is worse from a typical investor's standpoint than interest rate risk.
• D) If a 10-year, $1,000 par, zero coupon bond were issued at a price which gave investors a 10 percent rate of return, and if interest rates then dropped to the point where rd = YTM = 5%, we could be sure that the bond would sell at a premium over its $1,000 par value.
• E) If a 10-year, $1,000 par, zero coupon bond were issued at a price which gave investors a 10 percent rate of return, and if interest rates then dropped to the point where rd = YTM = 5%, we could be sure that the bond would sell at a discount below its $1,000 par value.

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Definitions:

High Standards

The commitment to maintain superior levels of quality, ethics, and performance in business practices and personal conduct.

Ethical Leadership

The practice of leading by example through upholding ethical standards and values, encouraging integrity, and fostering a moral work environment.

Holistic Thinking

An approach that seeks understanding by viewing problems or systems as whole entities rather than breaking them down into parts.