When the Required Return Is Constant but Different from the Coupon

question 3

Multiple Choice

When the required return is constant but different from the coupon rate, the price of a bond as it approaches its maturity date will ________.

• A) remain constant
• B) increase
• C) decrease
• D) approach par

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Definitions:

Encoding

The process of converting information into a form that allows it to be stored in our memory.

Cognitive Processes

Mental activities such as thinking, understanding, learning, and remembering.

Unattended Information

Information that is present in the environment but is not the focus of one's attention and hence is processed minimally or not at all.

Sensory Memory

The shortest-term element of memory, which allows retention of impressions of sensory information after the original stimuli have ended.