Which Statement Regarding Interest Rate Risk Is True

question 60

Multiple Choice

Which statement regarding interest rate risk is true?

• A)If the market interest rate for a bond is less than the bond's coupon rate, the bond will sell at a premium.
• B)If the market interest rate for a bond is greater than the bond's coupon rate, the bond will sell at a premium.
• C)If the market interest rate for a bond is less than the bond's coupon rate, the bond will sell at a discount.
• D)If the market interest rate for a bond is greater than the bond's coupon rate, the bond will sell at a discount.

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Definitions:

Comparative Balance Sheets

Side-by-side financial statements that compare a company's balance sheets at different points in time, typically to analyze trends or changes in financial position.

Net Income

The profit a company makes after subtracting all its costs and expenses from its total revenues.

Prepaid Insurance

An asset account that represents the amount of insurance premium payments made in advance and has not yet expired at the balance sheet date.

Prepaid Rent

An expense that is paid in advance for the use of property or equipment, which is then recognized as an expense over the period of use.