Which of the Following Statements Is CORRECT

question 8

Multiple Choice

Which of the following statements is CORRECT?

• A) A bond is likely to be called if its market price is below its par value.
• B) Even if a bond's YTC exceeds its YTM, an investor with an investment horizon longer than the bond's maturity would be worse off if the bond were called.
• C) A bond is likely to be called if its market price is equal to its par value.
• D) A bond is likely to be called if it sells at a discount below par.
• E) A bond is likely to be called if its coupon rate is below its YTM.

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Definitions:

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium is not achieved due to market failures or interventions.

Marginal Cost Curve

A graphical representation showing how the cost to produce one additional unit of output varies with the level of production.

Marginal Revenue Curve

A visual representation that shows the additional revenue generated by selling one more unit of a good or service.

Collude

To engage in a secret or illegal cooperation or conspiracy, especially in order to cheat or deceive others.