Which of the Following Is a True Statement

question 93

Multiple Choice

Which of the following is a true statement?

• A)The longer the time to maturity of a security,the smaller will be the duration
• B)The lower the coupon rate of a security,the higher the duration
• C)For a given duration and change in interest rates,the change in the price of the security will be larger for a lower starting level of interest rates
• D)The duration of a security remains constant no matter the level of market interest rates
• E)All of the options are true statements.

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Definitions:

Payback Period

The length of time required to recover the cost of an investment, calculated by dividing the initial investment by annual cash inflow.

Initial Investment

The initial sum of money spent on starting a project, purchasing an asset, or establishing a business venture.

Annual Cash Inflow

Annual cash inflow is the total amount of money received by an individual or organization in one year from various sources, such as sales, investments, or financing activities.

Payback Method

A capital budgeting technique that calculates the time required for an investment to generate cash flows sufficient to recover its initial cost.