Which of the Following Statements Is CORRECT

question 100

Multiple Choice

Which of the following statements is CORRECT?

• A) If two bonds have the same maturity, the same yield to maturity, and the same level of risk, the bonds should sell for the same
• Price regardless of the bond's coupon rates.
• B) All else equal, an increase in interest rates will have a greater
• Effect on the prices of short-term than long-term bonds.
• C) All else equal, an increase in interest rates will have a greater effect on higher-coupon bonds than it will have on lower-coupon
• Bonds.
• D) If a bond's yield to maturity exceeds its coupon rate, the bond's
• Price must be less than its maturity value.
• E) If a bond's yield to maturity exceeds its coupon rate, the bond's current yield must be less than its coupon rate.

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Definitions:

Good Y

A general term used to represent a specific product or commodity in economic models or discussions.

Demand Function

A mathematical representation that describes the relationship between the quantity of a good that consumers are willing and able to purchase at various prices, holding other factors constant.

Income Elasticity

A measure of how much the demand for a product changes in response to a change in consumers' income.

Income Elasticity

A measure of how the quantity demanded of a good or service changes in response to a change in consumer income.