Which of the Following Statements Is CORRECT

question 41

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) 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.
• C) Other things held constant,including the coupon rate,a corporation would rather issue noncallable bonds than callable bonds.
• D) Other things held constant,a callable bond would have a lower required rate of return than a noncallable bond because it would have a shorter expected life.
• E) Bonds are exposed to both reinvestment risk and price risk.Longer-term low-coupon bonds,relative to shorter-term high-coupon bonds,are generally more exposed to reinvestment risk than price risk.

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Definitions:

Basal Ganglia

A group of structures located deep within the brain that are involved in coordinating movement and reward.

Longitudinal Fissure

The deep groove that separates the two cerebral hemispheres of the brain.

Medulla

The medulla oblongata is the lower half of the brainstem, controlling vital autonomic functions such as heart rate, breathing, and blood pressure.

Breathe

The process of inhaling and exhaling air to facilitate gas exchange, primarily oxygen intake and carbon dioxide expulsion, in living organisms.