Which of the Following Statements Is False

question 22

Multiple Choice

Which of the following statements is false?

• A) The holder of a callable bond faces reinvestment risk precisely when it hurts: when market rates are lower than the coupon rate she is currently receiving.
• B) When yields have risen, the issuer will not choose to exercise the call on the callable bond.
• C) The issuer will exercise the call option only when the prevailing market rate exceeds the coupon rate of the bond.
• D) A callable bond is relatively less attractive to the bondholder than the identical non-callable bond.

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Definitions:

Rent Control

Government-imposed limits on the amount landlords can charge tenants for lease agreements, aimed at making housing more affordable.

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing companies to adjust to market changes fully.

Price Floor

A government-imposed minimum price charged on goods and services, aimed at preventing prices from going too low.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers.