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:

Operating Assets

Assets employed in the day-to-day operations of a business that are expected to generate income.

Generates Revenues

The process of bringing in income from business activities, such as sales of goods and services.

Investment Center

An investment center is a business unit within an organization that is responsible for its own revenue, expenses, and investments, and its performance is assessed based on return on investment.

Performance Report

A document that compares actual operational or financial results to planned or budgeted results.