Which of the Following Statements Is Most Correct

question 61

Multiple Choice

Which of the following statements is most correct?

• A) The market value of a bond will always approach its par value as its maturity date approaches, provided the issuer of the bond does not go bankrupt.
• B) If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices.
• C) The total yield on a bond is derived from interest payments and changes in the price of the bond.
• D) Statements a and c are correct.
• E) All of the statements above are correct.

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Definitions:

Risk Averse

A description of an investor's or an individual's preference for avoiding loss rather than making a gain.

Portfolio

An assortment of financial assets including stocks, bonds, commodities, cash, and equivalents, as well as mutual funds and exchange-traded funds (ETFs).

Standard Deviation

A statistical measure that quantifies the variation or dispersion of a set of data points.

Fire Insurance

A type of insurance policy that covers damage and losses caused by fire.