Which of the Following Set of Conditions Will Result in a Bond

question 14

Multiple Choice

Which of the following set of conditions will result in a bond with the greatest price volatility?

• A) a high coupon and a short maturity
• B) a high coupon and a long maturity
• C) a low coupon and a short maturity
• D) a low coupon and a long maturity

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Definitions:

Liquidation

The process of converting a company's assets into cash to pay off creditors before ceasing operations or redistributing assets to shareholders.

Security Interest

A legal claim or lien on collateral that secures the repayment of a debt or performance of some other obligation.

Voidable Preferences

Transactions made by a bankrupt debtor prior to bankruptcy that can be nullified or undone to ensure fair distribution of assets to creditors.

Antecedent Debts

Debts that were incurred prior to a particular event or transaction.