Which of the Following Statements Is Correct

question 119

Multiple Choice

Which of the following statements is correct?

• A) Other things held constant,a callable bond would have a lower required rate of return than a noncallable bond.
• B) Other things held constant,a corporation would rather issue noncallable bonds than callable bonds.
• C) Reinvestment rate risk is worse from a typical investor's standpoint than interest rate price risk.
• D) If a 10-year,$1,000 par,zero coupon bond were issued at a price which gave investors a 10 percent rate of return,and if interest rates then dropped to the point where r_d = YTM = 5%,we could be sure that the bond would sell at a premium over its $1,000 par value.
• E) If a 10-year,$1,000 par,zero coupon bond were issued at a price which gave investors a 10 percent rate of return,and if interest rates then dropped to the point where r_d = YTM = 5%,we could be sure that the bond would sell at a discount below its $1,000 par value.

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Definitions:

Frederic Engels

A German philosopher, social scientist, and collaborator with Karl Marx, who co-developed Marxist theory and co-authored works such as "The Communist Manifesto."

Capitalism

An economic system where private owners control trade and industry instead of the state.

Inequality Theories

Theories that seek to explain the origins, evolution, and consequences of social, economic, and political inequalities within societies.

Egalitarian Social Structures

Societal organizations where members are considered equals, with minimal hierarchies and disparities in wealth and power.