Which of the Following Statements Is Most Correct

question 49

Multiple Choice

Which of the following statements is most correct?

• A) All else equal,an increase in interest rates will have a greater effect on the prices of long-term bonds than it will on the prices of short-term bonds.
• B) All else equal,an increase in interest rates will have a greater effect on higher-coupon bonds than it will have on lower-coupon bonds.
• C) An increase in interest rates will have a greater effect on a zero-coupon bond with 10 years maturity than it will have on a 9-year bond with a 10 percent annual coupon.
• D) All of the above are correct.
• E) Answers a and c are both correct.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity of a business.

Operating Cash Inflows

The money received by a company from its operational activities, such as sales revenue, during a specific period.

Discount Rate

In finance, the rate used to calculate the present value of future cash flows, reflecting the risk and time value of money.

Salvage Value

This refers to the projected remaining worth of an asset upon reaching the conclusion of its operational lifespan.