Which of the Following Statements Is CORRECT

question 33

Multiple Choice

Which of the following statements is CORRECT?

• A) Assume that two bonds have equal maturities and are of equal risk, but one bond sells at par while the other sells at a premium above par. The premium bond must have a lower current yield and a higher
• Capital gains yield than the par bond.
• B) A bond's current yield must always be either equal to its yield to
• Maturity or between its yield to maturity and its coupon rate.
• C) If a bond sells at par, then its current yield will be less than
• Its yield to maturity.
• D) If a bond sells for less than par, then its yield to maturity is
• Less than its coupon rate.
• E) A discount bond's price declines each year until it matures, when
• Its value equals its par value.

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Definitions:

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a decrease in the per-unit cost as output increases.

Market Dominance

Market dominance refers to the situation where a company has a significant share of the total sales of a particular product or service, giving it substantial control over the market.

Herfindahl Index

The Herfindahl Index is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them, calculated by summing the squares of each firm's market share.

Clayton Act

A U.S. antitrust law enacted in 1914 to promote competition and prevent monopolies by prohibiting certain actions that could lead to anticompetitive practices.