Which of the Following Statements Is Most Correct

question 65

Multiple Choice

Which of the following statements is most correct?

• A) A 10-year bond would have more interest rate risk than a 5-year bond, but all 10-year bonds have the same interest rate risk.
• B) A 10-year bond would have more reinvestment rate risk than a 5-year bond, but all 10-year bonds have the same reinvestment rate risk.
• C) If their maturities were the same, a 5 percent coupon bond would have more interest rate risk than a 10 percent coupon bond.
• D) If their maturities were the same, a 5 percent coupon bond would have less interest rate risk than a 10 percent coupon bond.
• E) Zero coupon bonds have more interest rate risk than any other type bond, even perpetuities.

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Definitions:

Total Assets

The aggregate of current and fixed assets held by a corporation.

Total Liabilities

The total amount of financial obligations or debts that a company owes to external parties.

Return On Equity

A financial ratio that measures the profitability of a company in relation to the shareholders' equity, indicating how efficiently a company uses its equity to generate profit.

Expected Rate

An estimated percentage or amount, often used in financial projections and calculations like the return on an investment or growth.