Which of the Following Statements Is False

question 4

Multiple Choice

Which of the following statements is false?

• A) Before the call date, investors anticipate the optimal strategy that the issuer will follow, and the bond price reflects this strategy.
• B) The yield to maturity of a callable bond is calculated as if the bond were called at the earliest opportunity.
• C) A callable bond will trade at a lower price (and therefore a higher yield) than an otherwise equivalent non-callable bond.
• D) The price of a callable bond can be low when yields are high, but does not rise above the call value when the yield is low.

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Definitions:

Compensation Committee

A committee within a board of directors, responsible for recommending policies on executive compensation, including salaries, incentives, and benefit plans.

Audit Committee

In corporation law, a committee of the board that recommends and supervises the public accountant who audits the corporation’s financial records.

Executive Committee

A subgroup of an organization's board or leadership that makes key decisions between full board meetings or manages certain aspects of the organization's operations.

Corporate Profits

The surplus income of a corporation after all operating expenses, including taxes and interest on debt, have been deducted from total revenue.