Which of the Following Statements Is CORRECT

question 51

Multiple Choice

Which of the following statements is CORRECT?

• A) All else equal, high-coupon bonds have less reinvestment rate risk than low-coupon bonds.
• B) All else equal, long-term bonds have less interest rate price risk than short-term bonds.
• C) All else equal, low-coupon bonds have less interest rate price risk than high-coupon bonds.
• D) All else equal, short-term bonds have less reinvestment rate risk than long-term bonds.
• E) All else equal, long-term bonds have less reinvestment rate risk than short-term bonds.

---

Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, accounting for its current market price, face value, interest rate, and time to maturity.

Face Value

The original cost of a security or bond, as printed on the certificate, which does not change over time.

Coupon Rate

The interest rate specified on a bond or other fixed income security that the issuer promises to pay to the holder until maturity.

Current Yield

is the annual income (interest or dividends) divided by the current price of the security, used to assess the return of an investment.