Which of the Following Statements Is CORRECT

question 75

Multiple Choice

Which of the following statements is CORRECT?

• A) If a 10-year, $1,000 par, zero coupon bond were issued at a price that gave investors a 10% yield to maturity, and if interest rates then dropped to the point where rd = YTM = 5%, the bond would sell at a premium over its $1,000 par value.
• B) If a 10-year, $1,000 par, 10% coupon bond were issued at par, 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 above its $1,000 par value.
• C) Other things held constant, including the coupon rate, a corporation would rather issue noncallable bonds than callable bonds.
• D) Other things held constant, a callable bond would have a lower required rate of return than a noncallable bond because it would have a shorter expected life.
• E) Bonds are exposed to both reinvestment risk and price risk. Longer-term low-coupon bonds, relative to shorter-term high-coupon bonds, are generally more exposed to reinvestment risk than price risk.

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Definitions:

Adolescence

The phase of both physical and psychological growth that typically happens between puberty and reaching the age of legal majority.

Social Attitudes

The general feelings, beliefs, and behavior dispositions directed towards people, groups, or ideas within a society.

Superego

The part of the personality in Freudian psychoanalysis that represents internalized ideals and provides standards for judgment.

Neuroticism

A personality trait characterized by a tendency to experience negative emotions such as anxiety, anger, or depression, more frequently and intensely than others.