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.

---

Definitions:

Market

People with both the desire and the ability to buy a specific offering.

Competitive Set

A group of firms producing products or services that compete directly with each other in terms of features, benefits, and prices.

Product Grouping

The practice of organizing products in categories or collections based on similarities, purpose, or relevance to facilitate marketing, sales, and customer convenience.

Goals and Objectives

Specific outcomes that an organization or individual aims to achieve within a set timeframe.