Which of the Following Set of Conditions Will Result in a Bond

question 9

Multiple Choice

Which of the following set of conditions will result in a bond with the greatest price volatility?

• A) A high coupon and a short maturity.
• B) A high coupon and a long maturity.
• C) A low coupon and a short maturity.
• D) A low coupon and a long maturity.

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Definitions:

Accounts Payable

Accounts Payable is the amount of money a company owes its suppliers for goods or services received but not yet paid for.

Basic Earning Power Ratio

A financial ratio that shows how effectively assets are being used to generate earnings before the influence of taxes and financing costs.

Times-Interest-Earned Ratio

A measure of a company's ability to honor its debt payments, calculated by dividing earnings before interest and taxes (EBIT) by interest expenses.

Equity Multiplier

A ratio of financial leverage that calculates the proportion of a company's assets funded by its shareholders' equity.