Which of the Following Statements Is Most Correct

question 45

Multiple Choice

Which of the following statements is most correct?

• A) Other things held constant, a callable bond would have a lower required rate of return than a noncallable bond.
• B) Other things held constant, a corporation would rather issue noncallable bonds than callable bonds.
• C) Reinvestment rate risk is worse from a typical investor's standpoint than interest rate risk.
• D) If a 10-year, $1,000 par, zero coupon bond were issued at a price which gave investors a 10 percent rate of return, and if interest rates then dropped to the point where rd = YTM = 5%, we could be sure that the bond would sell at a premium over its $1,000 par value.
• E) If a 10-year, $1,000 par, zero coupon bond were issued at a price which gave investors a 10 percent rate of return, and if interest rates then dropped to the point where rd = YTM = 5%, we could be sure that the bond would sell at a discount below its $1,000 par value.

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Definitions:

Poisson Distribution

A probability distribution that expresses the probability of a given number of events happening in a fixed interval of time or space, assuming these events occur with a known constant mean rate and independently of the time since the last event.

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A count metric used in microbiology to quantify the bacteria present in a sample.

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The frequency or rate at which customers arrive at a point of service or location.