Which of the Following Statements Is Correct

question 119

Multiple Choice

Which of the following statements is correct?

• A) Other things held constant,a callable bond would have a lower required rate of return than a noncallable bond.
• B) Other things held constant,a corporation would rather issue noncallable bonds than callable bonds.
• C) Reinvestment rate risk is worse from a typical investor's standpoint than interest rate price risk.
• D) If a 10-year,$1,000 par,zero coupon bond were issued at a price which gave investors a 10 percent rate of return,and if interest rates then dropped to the point where r_d = YTM = 5%,we could be sure that the bond would sell at a premium over its $1,000 par value.
• E) If a 10-year,$1,000 par,zero coupon bond were issued at a price which gave investors a 10 percent rate of return,and if interest rates then dropped to the point where r_d = YTM = 5%,we could be sure that the bond would sell at a discount below its $1,000 par value.

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Definitions:

Machine-Hours

A measure of production time or capacity based on the number of hours machines are in operation.

Unused Capacity

The available production or service capability that is not being utilized by a business.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate manufacturing overhead costs to individual jobs or products based on a certain activity base, such as machine hours or labor hours.

Automated Lathe

A machine used in the manufacturing process that is controlled by a computer, improving precision and efficiency in producing parts.