Which One of the Following Statements Is Correct According to Malkiel's

question 13

Multiple Choice

Which one of the following statements is correct according to Malkiel's Theorems?

• A) For a given change in a bond's yield to maturity, the shorter the term to maturity, the greater will be the magnitude of the change in the bond's price.
• B) The price of an outstanding bond is unaffected by changes in market interest rates.
• C) The size of the change in a bond's price increases at a constant rate given even incremental increases in a bond's yield-to-maturity even as the term to maturity lengthens.
• D) For a given change in a bond's yield-to-maturity, the absolute magnitude of the resulting change in the bond's price is directly related to the bond's coupon rate.
• E) For a given absolute change in a bond's yield-to-maturity, a decrease in yield will cause a greater change in the bond's price than will an increase in yield.

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Definitions:

Short-term Credit Agreements

Agreements between a borrower and a lender for loans that are typically due within one year or less.

Discount Loans

Loans on which the interest and financing charges are deducted from the amount before the borrower receives it.

Interest

The cost of borrowing money or the return on investment, typically expressed as a percentage of the principal amount.

Principal

This term refers to the original sum of money borrowed in a loan or the initial amount of investment before earnings or losses.