If the Required Rate of Return on a Bond Is

question 30

True/False

If the required rate of return on a bond is greater than its coupon interest rate (and rd remains above the coupon rate), the market value of that bond will always be below its par value until the bond matures, at which time its market value will equal its par value. (Accrued interest between interest payment dates should not be considered when answering this question.)

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Definitions:

Unsystematic Risk

The risk associated with a specific company or industry, which can be mitigated through diversification in a portfolio.

Auto Airbags

Safety devices in vehicles designed to inflate in the event of a collision to protect passengers from injury.

Moose Jaw

A city located in the province of Saskatchewan, Canada, known for its historical significance and attractions.

Diversifiable Risks

The portion of investment risk that can be reduced or eliminated through diversification, such as risks specific to a particular company or industry.