Which of the Following Is a True Statement About the Relationship

question 167

Multiple Choice

Which of the following is a true statement about the relationship between the price of bonds and the interest rate?

• A) The prices of bonds are directly related to the interest rate.
• B) The prices of bonds increase when the interest rates rise.
• C) The prices of bonds are unrelated to the interest rate.
• D) The prices of bonds are inversely related to the interest rate.

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Definitions:

Investor Returns

The gain or loss on an investment over a specified period, usually expressed as a percentage of the investment's initial cost.

Capital Components

The various sources of funding a company uses to finance its operations, including debt, equity, and any hybrid instruments.

Cost of Capital

The essential return needed to justify the investment in a capital budgeting project, like constructing a new manufacturing facility.

Market Value

Today's market rate for the purchase or sale of services or assets.