Which of the Following Statements Is CORRECT

question 38

Multiple Choice

Which of the following statements is CORRECT?

• A) If a bond is selling at a discount to par,its current yield will be greater than its yield to maturity.
• B) All else equal,bonds with longer maturities have less price risk than bonds with shorter maturities.
• C) If a bond is selling at its par value,its current yield equals its capital gains yield.
• D) If a bond is selling at a premium,its current yield will be less than its capital gains yield.
• E) All else equal,bonds with larger coupons have less price risk than bonds with smaller coupons.

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Definitions:

Foreign Exchange Exposure

The risk associated with changes in foreign exchange rates affecting the value of investments held in foreign currencies.

Derivatives

Financial instruments whose value is based on the value of another asset, such as futures, options, and swaps.

Transactions Exposure

The potential risk of value change in foreign currency transactions due to fluctuating exchange rates.

Forward Contract

A forward contract is a customized financial agreement between two parties to buy or sell an asset at a specified future date for a price agreed upon today.