Which of the Following Statements Is CORRECT

question 4

Multiple Choice

Which of the following statements is CORRECT?

• A)If interest rates increase, a 10-year zero coupon bond's price will drop by a greater percentage than will a 10-year, 8% coupon bond.
• B)One nice thing about zero coupon bonds is that individual investors do not have to pay any taxes on a zero coupon bond until it matures, even if they are not holding the bonds as part of a tax-deferred account.
• C)If a bond with a sinking fund provision has a yield to maturity greater than its coupon rate, the issuing company would prefer to comply with the sinking fund by calling the bonds in at par rather than buying the bonds back in the open market.
• D)Because of the IRS's tax treatment of zero coupon bonds, pension funds and other tax-exempt entities rarely, if ever, invest in zero coupon bonds.
• E)Interest must be paid on a zero coupon bond's accrued value, but while the first year's interest is taxable at the ordinary income tax rate, subsequent years are taxed at the long-term capital gains rate (since they are received after more than a year).

Distinguish between material and immaterial breaches of contract and their eventual impact on the contractual relationship.

Learn the distinction between actual performance and substantial performance and their relevance in fulfilling contractual obligations.

Understand the conditions under which specific orders, like orders for specific performance, can be sought to enforce contract terms.

Acknowledge the effect of personal and unforeseeable circumstances (like illness or unforeseen incapacity) on the performance of contractual obligations.

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Definitions:

Labor Movement

A social and economic campaign to improve the rights, working conditions, and compensation of workers.

Social Darwinism

An ideology that applies the concept of "survival of the fittest" to human societies, justifying inequalities in wealth and social status as natural.

Liberty of Contract

A legal principle asserting the freedom of individuals to form contracts without government interference, emphasizing economic freedom and limiting state regulation.

Ghost Dance

A spiritual and political movement among Native Americans whose followersperformed a ceremonial “ghost dance” intended to connect the living with the dead and make theIndians bulletproof in battles intended to restore their homelands.