Which of the Following Statements Is CORRECT

question 40

Multiple Choice

Which of the following statements is CORRECT?

• 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.
• 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%.

---

Definitions:

Market Price

The present cost for purchasing or selling a product or service in a market.

Technology

The application of scientific knowledge and techniques for practical purposes, especially in industry and in our daily lives, leading to inventions, improvements, and advancements in various fields.

Expectations

In economics, expectations refer to the beliefs or forecasts about future events, such as inflation rates, economic growth, or future income levels, which can influence current economic behaviors.

Suppliers

Suppliers are individuals or companies that provide goods or services to other entities, typically within a commercial chain.