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:

Efficient

The characteristic of a resource allocation where it is impossible to improve the situation of one party without worsening the situation of another.

Skateboards

Skateboards are a type of sports equipment used for skateboarding, consisting of a flat board with wheels attached.

In‐line Skates

A type of roller skate where the wheels are arranged in a single line to mimic the blade of an ice skate, allowing for a variety of maneuvers.

Equilibrium

A state in a market or economy where supply equals demand, resulting in price stability and no net change in economic quantities.