Which of the Following Statements Is CORRECT

question 43

Multiple Choice

Which of the following statements is CORRECT?

• A) All else equal, a bond that has a coupon rate of 10% will sell at a discount if the required return for bonds of similar risk is 8%.
• B) The price of a discount bond will increase over time, assuming that the bond's yield to maturity remains constant.
• C) For a given firm, its debentures are likely to have a lower yield to maturity than its mortgage bonds.
• D) When large firms are in financial distress, they are almost always liquidated, whereas smaller firms are generally reorganized.
• E) The total return on a bond during a given year consists only of the coupon interest payments received.

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Definitions:

Total Assets

The sum of all assets owned by a company, reflecting its overall resources, including both current and non-current assets.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Equity Multiplier

A financial ratio that measures the portion of a company's assets that are financed by shareholder's equity, providing insights into leverage.

Profit Margin

A financial performance ratio, calculated by dividing net income by sales revenue, indicating how much profit a company keeps from its sales.