Which of the Following Statements Best Describes Interest Rates

question 111

Multiple Choice

Which of the following statements best describes interest rates?

• A) 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.
• B) The time to maturity does not affect the change in the value of a bond in response to a given change in interest rates.
• 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.

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Definitions:

Craft Workers

Skilled laborers who produce goods by hand through the use of tools, often associated with artisanal and traditional forms of making.

Strikes

Work stoppages caused by the mass refusal of employees to work, usually in protest against employment conditions, labor practices, or wage levels.

1830S

A decade that often denotes a period of significant historical events, including movements for independence in Latin America and the start of the era known as the Victorian Era in Britain.

Unions

Organizations formed by workers to advocate for their rights and interests.