Which of the Following Statement Is Correct with Regard to Bond

question 72

Multiple Choice

Which of the following statement is correct with regard to bond valuation?

• A) All else equal, the longer the time to maturity, the smaller the interest rate risk.
• B) All else equal, the higher the coupon rate, the greater the interest rate risk
• C) Spot interest rates are yields to maturity on loan or bonds that pay multiple cash flows to the investor.
• D) Bond price will fall as the market interest rate rise, as the present value of the bond's future cash flows is obtained by discounting at a higher interest rate.

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Definitions:

Attention

The mental activity of focusing attention on a single element of one's surroundings, while disregarding other stimuli.

Reinforcement

In behavioral psychology, a process that increases the likelihood of a behavior being repeated, which can be positive (adding a desirable stimulus) or negative (removing an aversive stimulus).

Operant Conditioning

A learning process in which the strength of a behavior is modified by reinforcement or punishment.

Classical Conditioning

A learning technique in which ongoing association between two stimuli eventually leads to a response initially induced by the second stimulus being induced by the first stimulus alone.