Which of the Following Statements Is CORRECT

question 32

Multiple Choice

Which of the following statements is CORRECT?

• 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.
• E) If a 10-year, $1,000 par, zero coupon bond were issued at a price that gave investors a 10% yield to maturity, and if interest rates then dropped to the point where r_d = YTM = 5%, the bond would sell at a premium over its $1,000 par value.

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Definitions:

Vested

A legal term indicating that an individual has an absolute right to an asset, benefit, or property, which cannot be taken away without consent.

Perfection

In legal terms, the process of securing a secured interest in an asset, ensuring priority over other claims in case of debtor default.

Motor Vehicle

A self-propelled vehicle used for transporting passengers or goods on ground.

Department of Motor Vehicles

The Department of Motor Vehicles (DMV) is a state-level government agency that administers vehicle registration and driver licensing.