Which of the Following Statements Is False

question 57

Multiple Choice

Which of the following statements is false?

• A) When the prevailing market interest rate is lower than the coupon rate, the bond will be traded at a premium.
• B) When the prevailing market interest rate is higher than the coupon rate, the bond will be traded at a discount.
• C) The longer the time to maturity, the less sensitive the market price of the bond becomes to changes in prevailing market rates.
• D) The higher the coupon rate, the less sensitive the market price of the bond becomes to changes in prevailing market rates.

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Definitions:

Recovery Phase

A stage in the economic cycle where activity is picking up and the economy grows after a recession or downturn.

Recession Phase

Part of the business cycle characterized by a decline in economic activity, marked by falling GDP and rising unemployment.

Full Employment

A situation in an economy where all available labor resources are being used in the most economically efficient way, typically characterized by low unemployment.

Cyclical Unemployment

Unemployment attributed to the cyclical trends in the economy, typically increasing during recessions and decreasing during expansions.