Which of the Following Statements Is Most Correct

question 6

Multiple Choice

Which of the following statements is most correct?

• A) A 10-year 10 percent coupon bond has less reinvestment rate risk than a 10-year 5 percent coupon bond (assuming all else equal).
• B) The total return on a bond for a given year arises from both the coupon interest payments received for the year and the change in the value of the bond from the beginning to the end of the year.
• C) The price of a 20-year 10 percent bond is less sensitive to changes in interest rates (i.e., has lower interest rate price risk) than the price of a 5-year 10 percent bond.
• D) A $1,000 bond with $100 annual interest payments with five years to maturity (not expected to default) would sell for a discount if interest rates were below 9 percent and would sell for a premium if interest rates were greater than 11 percent.
• E) Answers a, b, and c are correct statements.

Distinguish between different types of mortgages, including open and closed mortgages.

Understand the priority of mortgages and the impact of registration on that priority.

Apply knowledge of mortgage financing in land development scenarios, including the perspectives of developers, builders, and purchasers.

Interpret the reasons behind varying interest rates for first and second mortgages.

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Definitions:

Wages Expense

The total cost incurred by a company for the compensation of its employees, excluding benefits and bonuses.

Wages Payable

A liability account that records the amounts owed to employees for work that has been performed but not yet paid.

Biweekly Salaries

Compensation paid to employees on a two-week basis, typically resulting in 26 pay periods per year.

Fiscal Period

A specific time frame, such as a month, quarter, or year, used for financial accounting and reporting purposes.