Which of the Following Statements Is FALSE

question 5

Multiple Choice

Which of the following statements is FALSE?

• A)When the prevailing market interest rate is lower than the coupon rate, the bond will be traded at a premium.
• B)When the prevailing market interest rate is higher than the coupon rate, the bond will be traded at a discount.
• C)The longer the time to maturity, the less sensitive the market price of the bond becomes to changes in prevailing market rates.
• D)The higher the coupon rate, the less sensitive the market price of the bond becomes to changes in prevailing market rates.

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Definitions:

Goodwill

The excess value paid over the net assets of a company during acquisition, reflecting attributes like brand reputation and customer loyalty.

Retained Earnings

The portion of net income not distributed as dividends but retained by the company to reinvest in its core business or to pay debt.

Partial Equity Method

A variation of the equity method in accounting, where the investor recognises income from the investee to the extent of dividends received, with some adjustments.

Initial Value Method

An accounting method which records assets and investments at their original purchase cost.