Bonds A, B, and C All Have a Maturity of 10

question 73

Multiple Choice

Bonds A, B, and C all have a maturity of 10 years and a yield to maturity of 7%.Bond A's price exceeds its par value, Bond B's price equals its par value, and Bond C's price is less than its par value.Which of the following statements is CORRECT?

• A)If the yield to maturity on each bond decreases to 6%, Bond A will have the largest percentage increase in its price.
• B)Bond A has the most interest rate risk.
• C)If the yield to maturity on the three bonds remains constant, the prices of the three bonds will remain the same over the next year.
• D)If the yield to maturity on each bond increases to 8%, the prices of all three bonds will decline.
• E)Bond C sells at a premium over its par value.

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Definitions:

Exposure-Based Methods

Therapeutic techniques that involve the deliberate exposure of a patient to feared objects, situations, or memories to desensitize them and reduce their anxiety.

Pathological Fear

An excessive and irrational fear response that significantly disrupts daily functioning and is disproportionate to the actual danger presented.

Activation

The process of initiating action or behavior. In a psychological context, it often refers to the engagement of mental processes to perform tasks or respond to stimuli.

Fear Structure

A cognitive framework representing an individual's fears, including information about feared stimuli, fear responses, and meaning of fear experiences.