Which of the Following Bond Pricing Rules Is Incorrect

question 41

Multiple Choice

Which of the following bond pricing rules is incorrect?

• A)Bond prices and interest rates are inversely related
• B)Prices of long-term bonds are less sensitive to changes in interest rates than short-term bonds
• C)Bond price sensitivity increases at a decreasing rate as maturity increases
• D)Bond prices are more sensitive to a decline in market yield to maturity

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Definitions:

EPS

Earnings Per Share; a metric that indicates the portion of a company's profit allocated to each outstanding share of common stock.

Financial Risk

The possibility of losing money on an investment or business venture, including the risk of losing some or all of the original investment.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, amplifying both potential gains and losses.

Net Income

The total earnings of a company after subtracting all expenses from revenue, including taxes and interest.