Which of the Following Statements Is CORRECT

question 59

Multiple Choice

Which of the following statements is CORRECT?

• A) a callable 10-year, 10% bond should sell at a higher price than an otherwise similar noncallable bond.
• B) corporate treasurers dislike issuing callable bonds because these bonds may require the company to raise additional funds earlier than would be true if noncallable bonds with the same maturity were used.
• C) two bonds have the same maturity and the same coupon rate. however, one is callable and the other is not. the difference in prices between the bonds will be greater if the current market interest rate is above the coupon rate than if it is below the coupon rate.
• D) the actual life of a callable bond will always be equal to or less than the actual life of a noncallable bond with the same maturity. therefore, if the yield curve is upward sloping, the required rate of return will be lower on the callable bond.
• E) two bonds have the same maturity and the same coupon rate. however, one is callable and the other is not. the difference in prices between the bonds will be greater if the current market interest rate is below the coupon rate than if it is above the coupon rate.

---

Definitions:

Philosophy

The analysis of the basic aspects of knowledge, reality, and existence, particularly when examined within an academic setting.

Service Sector

A segment of the economy that involves delivering services rather than producing goods, including sectors like banking, healthcare, and education.

Economy

A system of production, distribution, and consumption of goods and services within a geographical area, governed by supply and demand laws.

Health and Medical Insurance

A type of insurance coverage that pays for medical and surgical expenses incurred by the insured, often including preventive care and treatments.