Which of the Following Statements Is CORRECT

question 41

Multiple Choice

Which of the following statements is CORRECT?

• A) If a 10-year,$1,000 par,zero coupon bond were issued at a price that gave investors a 10% yield to maturity,and if interest rates then dropped to the point where r_d = YTM = 5%,the bond would sell at a premium over its $1,000 par value.
• B) If a 10-year,$1,000 par,10% coupon bond were issued at par,and if interest rates then dropped to the point where r_d = YTM = 5%,we could be sure that the bond would sell at a premium above its $1,000 par value.
• C) Other things held constant,including the coupon rate,a corporation would rather issue noncallable bonds than callable bonds.
• D) Other things held constant,a callable bond would have a lower required rate of return than a noncallable bond because it would have a shorter expected life.
• E) Bonds are exposed to both reinvestment risk and price risk.Longer-term low-coupon bonds,relative to shorter-term high-coupon bonds,are generally more exposed to reinvestment risk than price risk.

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Definitions:

Specific Heats

The amount of heat per unit mass required to raise the temperature of a substance by one degree Celsius, a physical property that varies among different substances.

Copper, Aluminum

Copper is a reddish metal with high electrical and thermal conductivity, while aluminum is a silvery-white, soft, non-magnetic metal, both widely used in various applications.

Concrete

A building material made from a mixture of cement, aggregate (such as sand or gravel), and water, which hardens over time.

Specific Heat

Specific heat is the amount of heat per unit mass required to raise the temperature of a substance by one degree Celsius, reflecting the substance's ability to absorb heat.