Which of the Following Statements Is Correct

question 77

Multiple Choice

Which of the following statements is correct?

• A) Bond prices and interest rates move in the same direction,i.e. ,if interest rates rise,so will bond prices.
• B) The market price of a discount bond will approach the bond's par value as the maturity date approaches.Barring changes in the probability of default,there is no way the value of the bond can fail to increase each year as the time to maturity approaches.
• C) The "current yield" on a noncallable discount bond will normally exceed the bond's yield to maturity.
• D) The "current yield" on a noncallable discount bond will normally exceed the bond's coupon interest rate.

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Definitions:

Crowding Out

A situation in economics where increased public sector spending reduces or eliminates private sector spending.

Government Borrowing

The act of governments raising funds through the issuance of securities or bonds to finance public expenditure, leading to government debt.

Personal Income Taxes

Taxes imposed on individuals' income by the government, including wages, salaries, and investment earnings.

Federal Tax Revenues

The income earned by the government through all types of taxes, including income, payroll, and excise taxes, used to fund public services and operations.