Which of the Following Bonds Carry Significant Risk That the Issuer

question 39

Multiple Choice

Which of the following bonds carry significant risk that the issuer will not make current or future payments?

• A) Credit quality risk bonds
• B) Interest rate risk bonds
• C) Liquidity rate risk bonds
• D) Junk bonds

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Definitions:

Type II Error

The error that occurs when a false null hypothesis is not rejected, meaning a real effect or difference was missed.

Type I Error

The mistake of rejecting a true null hypothesis, or in other words, concluding that a difference or effect exists when it actually does not.

Decision Rule

A pre-determined guideline or criterion used to choose between multiple alternatives in the face of uncertainty, often based on statistical analysis.

P Value

The probability of observing the given result, or more extreme, by chance if the null hypothesis is true.