Which of the Following Has the Greatest Price Risk

question 101

Multiple Choice

Which of the following has the greatest price risk?

• A) A 10-year, $1,000 face value, 10 percent coupon bond with semiannual interest payments.
• B) A 10-year, $1,000 face value, 10 percent coupon bond with annual interest payments.
• C) A 10-year, $1,000 face value, zero coupon bond.
• D) A 10-year $100 annuity.
• E) All of the above have the same price risk since they all mature in 10 years.

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Definitions:

Invoice Price

The price at which a product or service is sold, typically listed on an invoice as the cost before any discounts or allowances.

Credit Terms

Conditions under which credit is extended by a seller to a buyer, detailing the repayment period, interest rate, and other rules governing the borrowing.

Perpetual Inventory Method

An accounting method that continuously updates the inventory levels and cost of goods sold with each sale or purchase of inventory.

Credit Terms

Conditions under which credit will be extended to a customer, including payment due dates and any discounts for early payment.