Which of the Following Bonds Will Have the Largest Percentage

question 77

Multiple Choice

Which of the following bonds will have the largest percentage increase in value if interest rates decrease by 1 percent?

• A) 2-year, 5 percent coupon bond
• B) 30-year, 10 percent coupon bond
• C) 10-year, zero-coupon
• D) 30-year, zero-coupon

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Definitions:

Allowance Method

An accounting technique that estimates and deducts accounts receivable deemed to be uncollectible from total receivables, creating an allowance for doubtful accounts.

Uncollectible Receivables

Debts owed to a company that are considered uncollectible and are written off as a loss.

Bad Debt Expense

An expense account representing the estimated uncollectible accounts receivable.

Direct Write-off Method

An accounting method where bad debts are expensed only when specific accounts are deemed uncollectible and written off.