Whenever a Bond's Required Return Is Different from Its Coupon

question 216

True/False

Whenever a bond's required return is different from its coupon interest rate, the passage of time will affect the bond's value, even if the required return remains constant until maturity.

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Definitions:

Due Diligence

The investigation or exercise of care that a reasonable business or person is expected to take before entering into an agreement or a financial transaction with another party.

Negotiable Instrument

A document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payer named on the document.

Confession of Judgment

A legal agreement in which a debtor permits a creditor to obtain a judgment against them without a trial.

Undertaking

A formal pledge or promise, often in a legal context, indicating an agreement to perform a particular action or task.