Which of the Following Statements Is CORRECT

question 22

Multiple Choice

Which of the following statements is CORRECT?

• A) A bond's current yield must always be either equal to its yield to maturity or between its yield to maturity and its coupon rate.
• B) If a bond sells at par, then its current yield will be less than its yield to maturity.
• C) If a bond sells for less than par, then its yield to maturity is less than its coupon rate.
• D) A discount bond's price declines each year until it matures, when its value equals its par value.
• E) Assume that two bonds have equal maturities and are of equal risk, but one bond sells at par while the other sells at a premium above par.The premium bond must have a lower current yield and a higher capital gains yield than the par bond.

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Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production labor.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent or salaries.

Demand Graph

A visual representation of the quantity of goods consumers are willing and able to buy at various prices, usually depicted by a downward-sloping curve.

Farm Product

Goods generated from agriculture, including crops and livestock, intended primarily for consumption and use.