Which of the Following Statements Is Correct

question 62

Multiple Choice

Which of the following statements is correct?

• A) 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.
• B) All else equal, an increase in interest rates will have a greater effect on the prices of short- term than long-term bonds.
• C) 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.
• D) If a bond's yield to maturity exceeds its coupon rate, the bond's price must be less than its maturity value.

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Definitions:

Local Grocery Store

A retail store that primarily sells food, including fresh produce, meats, dairy, and other groceries, catering to the local community's needs.

Price Elasticity

A measure of how the quantity demanded of a good responds to a change in the price of that good.

Profit-maximizing Price

The price level at which a firm can maximize its profit, calculated where marginal cost equals marginal revenue.

Elasticity of Demand

The measure of how much the quantity demanded of a good or service changes in response to a change in its price.