Which of the Following Are True About the Interest-Rate Sensitivity

question 16

Multiple Choice

Which of the following are true about the interest-rate sensitivity of bonds
I. Bond prices and yields are inversely related.
II. Prices of long-term bonds tend to be more sensitive to interest-rate changes than prices of short-term bonds.
III. Interest-rate risk is directly related to the bond's coupon rate.
IV. The sensitivity of a bond's price to a change in its yield to maturity is inversely related to the yield to maturity at which the bond is currently selling.

• A)I and II
• B)I and III
• C)I, II, and IV
• D)II, III, and IV
• E)I, II, III, and IV

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Definitions:

Seasonal Inventory

Inventory stockpiled in anticipation of seasonal demand peaks to ensure adequate supply and optimal service levels.

Demand

The desire and willingness of consumers to purchase goods or services at a given price over a specific time period.

Capacity

Pertains to the highest amount of production a business can maintain for creating a product or delivering a service.

Supply Chain

A network between a company and its suppliers to produce and distribute a specific product to the final buyer, involving the flow of materials, information, and finances.