8-59 Which of the Following Statements Is True

question 21

Multiple Choice

8-59 Which of the following statements is true?

• A)An increase in interest rates leads to an increase in the market value of financial securities.
• B)Value of longer term securities decreases at a diminishing rate for increases in interest rates.
• C)Value of longer term securities increases at an increasing rate for any decline in interest rates.
• D)The shorter the maturity of a fixed income asset or liability,the greater the fall in market value for any given interest rate increase.
• E)The longer the maturity of a fixed income asset or liability,the greater the fall in market value for any given interest rate decrease.

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Definitions:

Profitability Index

Profitability Index (PI) is an investment appraisal technique that calculates the ratio between the present value of future cash flows and the initial investment cost, helping to determine the desirability of a project.

Cash Outflows

Money or funds leaving a business, typically for expenses, investments, or other payments.

Investment Projects

Initiatives or plans requiring capital investments aimed at generating future benefits or returns.

Simple Rate

A straightforward percentage or interest rate, typically referring to finance or investment, without compounding over time.