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%.

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Definitions:

North America

A continent located in the Northern Hemisphere, largely between the Atlantic and Pacific Oceans, consisting of countries such as Canada, the United States, and Mexico.

Narcissistic Personality Inventory

A self-report inventory used to measure narcissism in individuals.

Reliable

Capable of being trusted or depended on; consistently good in quality or performance.

Valid

Legally sound, binding, or justifiable; having a solid basis in logic or fact.