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.

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Definitions:

Insolvency

The condition of being unable to pay debts as they fall due, often leading to bankruptcy proceedings.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Financial Statements

Reports that summarize the financial condition and operations of a business, including the balance sheet, income statement, and cash flow statement.

Balance Sheet

An accounting statement of a firm’s financial position at a specified time.