Which of the Following Statements Is Most Correct

question 94

Multiple Choice

Which of the following statements is most correct?

• A)The market value of a bond usually approaches its par value as the bond approaches maturity.
• B)If the government unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices.
• C)A bond's price depends on the issuer's financial condition as well as the general level of interest rates.
• D)Statements a. and c. are correct.
• E)All of the statements are correct.

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Definitions:

Straight-Line Method

A depreciation technique which evenly spreads the cost of a fixed asset over its useful life.

Effective Interest Rate Method

A method of calculating the amortized cost of a bond and the periodic interest expense over the life of the bond.

Material Differences

Significant discrepancies or variations that can affect the decisions of users of financial statements, often necessitating adjustments or disclosures.

Redemption Of Bonds

Redemption of bonds is the process by which a bond issuer repays the principal amount of the bond to the bondholders at maturity.