Which of the Following Statements Is CORRECT

question 2

Multiple Choice

Which of the following statements is CORRECT?

• A) If a coupon bond is selling at par,its current yield equals its yield to maturity.
• B) If rates fall after its issue,a zero coupon bond could trade at a price above its maturity (or par)value.
• C) If rates fall rapidly,a zero coupon bond's expected appreciation could become negative.
• D) If a firm moves from a position of strength toward financial distress,its bonds' yield to maturity would probably decline.
• E) If a bond is selling at a premium,this implies that its yield to maturity exceeds its coupon rate.

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Definitions:

Marginal Tax Rate

The rate at which the last dollar of income is taxed, reflecting the percentage of tax paid on any additional dollar of income.

Excise Taxes

Taxes levied on specific goods or services, such as gasoline or alcohol, often imposed to discourage their use or generate revenue.

Income People

Individuals or groups categorized by the level of income they receive, often used in discussions about economic policy or social welfare.

Progressive Tax

A taxation system where the tax rate increases as the taxable amount increases, typically leading to higher earners paying a larger percentage of their income than lower earners.