Which of the Following Statements Best Describes Bonds

question 1

Multiple Choice

Which of the following statements best describes bonds?

• A) 10-year, zero coupon bonds have higher reinvestment rate risk than 10-year, 10% coupon bonds.
• B) A 10-year, 10% coupon bond has less reinvestment rate risk than a 10-year, 5% coupon bond (assuming all else equal).
• C) The total return on a bond during a given year is the sum of the coupon interest payments received during the year and the change in the value of the bond from the beginning to the end of the year.
• D) The price of a 20-year, 10% bond is less sensitive to changes in interest rates than the price of a 5-year, 10% bond.

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Definitions:

Cognitive Dissonance

The psychological discomfort experienced by an individual who holds two or more contradictory beliefs, values, or ideas simultaneously.

Zimbardo's Simulated Prison

An experiment conducted by psychologist Philip Zimbardo in 1971 to investigate the psychological effects of perceived power, focusing on the struggle between prisoners and prison officers.

Role Playing

A method or technique where individuals act out or perform the part of characters in particular scenarios, often used in training or therapy.

Social Norms

Shared guidelines or expected behaviors within a society or group, influencing individuals' actions and decisions.