Which of the Following Statements Is CORRECT

question 13

Multiple Choice

Which of the following statements is CORRECT?

• A) The time to maturity does not affect the change in the value of a bond in response to a given change in interest rates.
• B) You hold two bonds.One is a 10-year, zero coupon, bond and the other is a 10-year bond that pays a 6% annual coupon.The same market rate, 6%, applies to both bonds.If the market rate rises from the current level, the zero coupon bond will experience the smaller percentage decline.
• C) The shorter the time to maturity, the greater the change in the value of a bond in response to a given change in interest rates.
• D) The longer the time to maturity, the smaller the change in the value of a bond in response to a given change in interest rates.
• E) You hold two bonds.One is a 10-year, zero coupon, issue and the other is a 10-year bond that pays a 6% annual coupon.The same market rate, 6%, applies to both bonds.If the market rate rises from the current level, the zero coupon bond will experience the larger percentage decline.

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Definitions:

Mesa

A landform characterized by a flat-topped mountain or hill, typically with steep sides, found in arid and semi-arid regions.

Shield

A large, relatively flat expanse of ancient, Precambrian igneous and metamorphic rocks that form the stable continental core.

Well-developed Soils

Soils that have undergone extensive formation processes, exhibiting strong structural characteristics and distinct horizons or layers.

Unweathered Lava

Refers to lava that has been recently erupted and has not been altered by weathering processes.