Which of the Following Statements Is CORRECT

question 53

Multiple Choice

Which of the following statements is CORRECT?

• A) All else equal, an increase in interest rates will have a greater effect on the prices of short-term than long-term bonds.
• B) All else equal, an increase in interest rates will have a greater effect on higher-coupon bonds than it will have on lower-coupon bonds.
• C) If a bond's yield to maturity exceeds its coupon rate, the bond's price must be less than its maturity value.
• D) If a bond's yield to maturity exceeds its coupon rate, the bond's current yield must be less than its coupon rate.
• E) If two bonds have the same maturity, the same yield to maturity, and the same level of risk, the bonds should sell for the same price regardless of the bond's coupon rates.

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Definitions:

Percentage Change

A mathematical calculation that describes the degree of change over time, expressed as a fraction of the starting value.

Price Of Product

The monetary value assigned to a good or service that consumers are required to pay to acquire it.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price level in a specific time period.

Midpoint Formula

A method used in geometry to determine the exact center point between two defined points on a line segment.