The Current Market Interest Rate Declines from 10 Percent to 8

question 110

Multiple Choice

The current market interest rate declines from 10 percent to 8 percent. Due to interest rate reinvestment risk, the bondholders will:

• A)receive a lower market value for the bond.
• B)receive a higher principal at the maturity of the bond.
• C)call back the bond before its maturity.
• D)earn a lower return on the reinvested cash flows.
• E)receive a lower coupon interest than mentioned in the bond indenture.

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Definitions:

Neurons

Specialized cells transmitting nerve impulses; the basic building blocks of the nervous system.

Nerve Cells

Specialized cells that transmit electrical signals throughout the body, forming the basis of the nervous system.

Reflexes

Automatic, involuntary responses to specific stimuli that do not require conscious thought.

Spinal Cord

A long, thin, tubular structure made up of nervous tissue, which extends from the brainstem down the back, and transmits neural signals between the brain and the body.