Which of the Following Statements Is CORRECT

question 64

Multiple Choice

Which of the following statements is CORRECT?

• A) 10-year,zero coupon bonds have more reinvestment risk than 10-year,10% coupon bonds.
• B) A 10-year,10% coupon bond has less reinvestment risk than a 10-year,5% coupon bond (assuming all else equal).
• C) The total (rate of)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,divided by the bond's price at the beginning 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.
• E) A $1,000 bond with $100 annual interest payments that has 5 years to maturity and is not expected to default would sell at a discount if interest rates were below 9% and at a premium if interest rates were greater than 11%.

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Definitions:

Coasting

The action of allowing a vehicle to move by its own momentum with minimal or no use of the engine's power.

Fully Disengaged

A state in which a mechanism, gear, or clutch is completely disconnected or inactive, preventing any transmission of power.

Full Travel

The maximum distance or range of motion that a mechanical component or system can move or be moved.

Clutch Brake

A component used to momentarily stop or slow the rotation of the transmission input shaft for easier gear engagement when the vehicle is stationary.