Which of the Following Statements Is Most Correct

question 32

Multiple Choice

Which of the following statements is most correct?

• A) A callable 10-year, 10 percent bond should sell at a higher price than an otherwise similar noncallable bond.
• B) Two bonds have the same maturity and the same coupon rate. However, one is callable and the other is not. The difference in prices between the bonds will be greater if the current market interest rate is below the coupon rate than if it is above the coupon rate.
• C) Two bonds have the same maturity and the same coupon rate. However, one is callable and the other is not. The difference in prices between the bonds will be greater if the current market interest rate is above the coupon rate than if it is below the coupon rate.
• D) The actual life of a callable bond will be equal to or less than the actual life of a noncallable bond with the same maturity date. Therefore, if the yield curve is upward sloping, the required rate of return will be lower on the callable bond.
• E) Corporate treasurers dislike issuing callable bonds because these bonds may require the company to raise additional funds earlier than would be true if noncallable bonds with the same maturity were used.

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Definitions:

Handling Objections

The practice of addressing concerns or doubts raised by customers during the sales process to facilitate a transaction.

Denial

A psychological defense mechanism wherein an individual refuses to accept reality or facts, often as a way to avoid dealing with uncomfortable feelings or events.

Sales Territories

Designated geographic or demographic areas assigned to sales representatives or teams to manage and generate sales.

Revenue Growth

The increase in a company's sales and income over a specific period, indicating its business success.