Which of the Following Statements Is CORRECT

question 51

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 ratesThen dropped to the point where rd = 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 rd = 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, 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.
• E) Reinvestment rate risk is worse from an investor's standpoint than interest rate price risk if the investor has a short investment time horizon.

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Definitions:

Previous Balance

The amount of money owed or available in an account before the latest transactions.

Cycle Closing

The process of concluding a billing or operational period at the end of a cycle.

Simple Interest

The fundamental interest calculation.

Monthly Basis

A frequency term that indicates something occurs every month or is calculated on a monthly basis.