Which of the Following Statements Is CORRECT

question 34

Multiple Choice

Which of the following statements is CORRECT?

• A) If a coupon bond is selling at a premium,then the bond's current yield is zero.
• B) If a coupon bond is selling at a discount,then the bond's expected capital gains yield is negative.
• C) If a bond is selling at a discount,the yield to call is a better measure of the expected return than the yield to maturity.
• D) The current yield on Bond A exceeds the current yield on Bond B.Therefore,Bond A must have a higher yield to maturity than Bond B.
• E) If a coupon bond is selling at par,its current yield equals its yield to maturity.

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Definitions:

Balance Theory

A theory which proposes that the motivation to maintain consistency among one’s thoughts colors how people form new attitudes and can also drive them to change existing attitudes.

Cognitive Dissonance

A psychological conflict resulting from incongruous beliefs and attitudes held simultaneously.

Thoughts

Mental processes or ideas that occur as part of cognitive functions like reasoning, perception, and judgment.

Recency Effect

The tendency to remember more recent information better than earlier information, often impacting how decisions and judgments are made.