Which of the Following Statements Is FALSE

question 63

Multiple Choice

Which of the following statements is FALSE?

• A)Prices of bonds with lower durations are more sensitive to interest rate changes.
• B)When a bond is trading at a discount,the price increase between coupons will exceed the drop when a coupon is paid,so the bond's price will rise and its discount will decline as time passes.
• C)Coupon bonds may trade at a discount,at a premium,or at par.
• D)The sensitivity of a bond's price changes in interest rates is the bond's duration.

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Definitions:

Compounded Monthly

The process in which interest earned on an investment is added to the principal balance, and then future interest accrual includes the increased balance, recalculated on a monthly basis.

Total Interest Earned

The cumulative amount of interest received from an investment, loan, or savings account, over a particular period.

Original Investment

The initial amount of money invested in a project or security.

Conditional Sale Contracts

agreement for the sale of goods where the price is payable in instalments and the goods remain the property of the seller until the full price is paid.