Which of the Following Statements Is CORRECT

question 17

Multiple Choice

Which of the following statements is CORRECT?

• A) If a bond is selling at a discount to par, its current yield will be greater than its yield to maturity.
• B) All else equal, bonds with longer maturities have less interest rate (price) risk than bonds with shorter maturities.
• C) If a bond is selling at its par value, its current yield equals its capital gains yield.
• D) If a bond is selling at a premium, its current yield will be less than its capital gains yield.
• E) All else equal, bonds with larger coupons have less interest rate (price) risk than bonds with smaller coupons.

---

Definitions:

Savings

The portion of income that is not spent on consumption or taxes, typically put aside for future use or investments.

Disposable Income

Income available for spending and saving after income taxes have been accounted for.

C + I

An economic formula representing consumer spending (C) plus investment spending (I), components of a country's GDP calculation.

Disposable Income

Households' financial resources for expenditure and savings following income tax deductions.