Which of the Following Statements Is CORRECT

question 4

Multiple Choice

Which of the following statements is CORRECT?

• A)If interest rates increase, a 10-year zero coupon bond's price will drop by a greater percentage than will a 10-year, 8% coupon bond.
• B)One nice thing about zero coupon bonds is that individual investors do not have to pay any taxes on a zero coupon bond until it matures, even if they are not holding the bonds as part of a tax-deferred account.
• C)If a bond with a sinking fund provision has a yield to maturity greater than its coupon rate, the issuing company would prefer to comply with the sinking fund by calling the bonds in at par rather than buying the bonds back in the open market.
• D)Because of the IRS's tax treatment of zero coupon bonds, pension funds and other tax-exempt entities rarely, if ever, invest in zero coupon bonds.
• E)Interest must be paid on a zero coupon bond's accrued value, but while the first year's interest is taxable at the ordinary income tax rate, subsequent years are taxed at the long-term capital gains rate (since they are received after more than a year).

Analyze the role of consumer budget on the elasticity of demand.

Evaluate the impact of price changes on consumer purchasing behavior and company revenue strategies.

Understand the implications of elasticity on taxing and public policy.

Assess the effects of advertising on elasticity of demand.

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Definitions:

Erroneous Stereotypes

Refers to incorrect and oversimplified beliefs or generalizations about groups or types of people that often lead to misunderstandings or prejudiced attitudes.

Authoritarian Personality

A personality type characterized by rigid adherence to conventional values, submission to authority, and often prejudicial attitudes towards out-group members.

Self-Fulfilling Prophecies

The phenomenon where a belief or expectation, about a person or situation, leads to behaviors that cause the belief to come true.

Expectancy Effects

The phenomenon where a person's behavior or performance is influenced by the expectations placed upon them by others, often leading to the fulfillment of those expectations.