Which Statement Regarding Bonds Is True

question 2

Multiple Choice

Which statement regarding bonds is true?

• A)If a 10-year, $1,000 par, 10% coupon bond were issued at par, and if interest rates then dropped to the point where r_d = YTM = 5%, we could be sure that the bond would sell at a premium above its $1,000 par value.
• B)Other things held constant, a corporation would rather issue noncallable bonds than callable bonds.
• C)Other things held constant, a callable bond would have a lower required rate of return than a noncallable bond.
• D)Reinvestment rate risk is worse from an investor's standpoint than interest rate price risk if the investor has a short investment time horizon.

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Definitions:

Reaction

A chemical process in which substances interact, leading to the transformation into other substances.

Structure

The arrangement of atoms within a molecule, determining its shape and properties.

Product

A substance that is formed as a result of a chemical reaction.

Reagents

Chemicals or materials introduced into a system to initiate or participate in chemical reactions.