Which of the Following Statements Is CORRECT

question 4

Multiple Choice

Which of the following statements is CORRECT?

• A) If rates fall after its issue, a zero coupon bond could trade at a price above its par value.
• B) If rates fall rapidly, a zero coupon bond's expected appreciation could become negative.
• C) If a firm moves from a position of strength toward financial distress, its bonds' yield to maturity would probably decline.
• D) If a bond is selling at a premium, this implies that its yield to maturity exceeds its coupon rate.
• E) If a coupon bond is selling at par, its current yield equals its yield to maturity.

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Definitions:

Noncash Credits

Transactions that increase a company's assets or decrease liabilities without the direct movement of cash.

Indirect Method

A technique used in cash flow statements to adjust net income for non-cash transactions, deferrals, and accruals to compute operating cash flow.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the loss of value over time.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.