Which of the Following Statements Is CORRECT

question 35

Multiple Choice

Which of the following statements is CORRECT?

• A) If their maturities and other characteristics were the same, a 5% coupon bond would have more interest rate price risk than a 10% coupon bond.
• B) A 10-year coupon bond would have more reinvestment rate risk than a 5-year coupon bond, but all 10-year coupon bonds have the same amount of reinvestment rate risk.
• C) A 10-year coupon bond would have more interest rate price risk than a 5-year coupon bond, but all 10-year coupon bonds have the same amount of interest rate price risk.
• D) If their maturities and other characteristics were the same, a 5% coupon bond would have less interest rate price risk than a 10% coupon bond.
• E) A zero coupon bond of any maturity will have more interest rate price risk than any coupon bond, even a perpetuity.

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Definitions:

Mantle Plumes

Columns of hot, solid material that rise from deep within the Earth's mantle and can cause volcanic hotspots.

Seamounts

Submerged mountain ranges or isolated peaks formed by volcanic activity beneath the ocean surface, often rising several thousand feet from the seabed.

Volcanic Eruptions

The process where magma, ash, and gases are expelled from a volcano, significantly impacting the surrounding environment.

Back-Arc Basin

A geological formation that occurs on the side of a subduction zone opposite the volcanic arc, where the oceanic crust is spreading and thinning.