If Interest Rates Decline, Bondholders Will Earn

question 42

Multiple Choice

If interest rates decline, bondholders will earn:

• A)a lower rate of return on reinvested cash flows.
• B)a higher current yield.
• C)no capital gain on the bond's maturity.
• D)a lower coupon interest on the bond.
• E)a higher maturity value on the maturity date.

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Definitions:

Anxiety-Arousing

Pertaining to stimuli or situations that provoke a state of increased nervousness, fear, or unease.

Oedipus Complex

A psychoanalytic theory by Freud suggesting a child's unconscious desire for the opposite-sex parent and jealousy towards the same-sex parent.

Childhood

The period of life from birth to adolescence, characterized by growth, development, and learning.

Repression

A psychological defense mechanism where distressing thoughts and memories are unconsciously blocked from conscious awareness.