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:

Fixed Manufacturing Overhead

Ongoing expenses that do not change in total with the level of production or sales volume, such as salaries, rent, and insurance, associated specifically with the manufacturing process.

Variable Costing

An accounting method that includes only variable costs—those that change with production levels—in the cost of goods sold and inventory valuation.

Unit Product Cost

The total cost associated with producing one unit of a product, including direct materials, direct labor, and allocated overhead.

Segmented Income Statement

An income statement that separates costs and revenues into different segments, departments, or divisions of a business.