Which of the Following Statements Is Correct

question 40

Multiple Choice

Which of the following statements is correct?

• A) A zero coupon bond provides no interest payments during the life of the bond, but it provides its owner with a capital gain when the bond matures.In South Africa, these bonds appeal to high-income investors because the tax on capital gains income is deferred until the bond matures or is sold.
• B) The "penalty" for having a low bond rating is more severe when the Security Market Line (SML) is relatively steep than when it is not so steep.
• C) A bond that is callable has a chance of being retired earlier than its stated term to maturity.Therefore, if the yield curve is upward sloping, an outstanding callable bond should have a lower yield to maturity than an otherwise identical noncallable bond.
• D) A zero coupon bond is a bond that pays no interest and is offered (and subsequently sells) at par, therefore providing compensation to investors in the form of capital appreciation.
• E) None of the above is a correct statement.

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Definitions:

Terpene

A class of natural organic compounds, typically derived from plants, with a structure based on isoprene units.

Monocyclic

Pertains to chemical compounds that contain only one cyclic structure within their molecular framework.

Hydrogenated

A process where hydrogen atoms are added to the double or triple bonds of organic compounds, resulting in the saturation of the molecules and often changing their physical and chemical properties.

Platinum Catalyst

A substance containing platinum used to increase the rate of a chemical reaction without being consumed in the process, commonly used in hydrogenation reactions.