Which of the Following Statements Is FALSE

question 44

Multiple Choice

Which of the following statements is FALSE?

• A) When a bond is trading at a discount, the price drop when a coupon is paid will be larger than the price increase between coupons, so the bond's discount will tend to decline as time passes.
• B) When a bond trades at a price equal to its face value, it is said to trade at par.
• C) As interest rates and bond yield rise, bond prices will fall.
• D) Ultimately, the prices of all bonds approach the bond's face value when the bonds mature and their last coupon are paid.

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Definitions:

Forward Contract

A personalized deal between two parties to exchange an asset at a set price on an agreed future date.

Settlement Date

The date on which a trade or transaction must be finalized, with the buyer delivering payment and the seller delivering the asset.

European Put

A type of option contract that gives the holder the right, but not the obligation, to sell a specified asset at a predetermined price before or at the option's expiration date, but only exercisable in Europe.

Specified Price

A definite price point set in a contract or agreement, often referring to the predetermined price in financial transactions.