Which of the Following Statements Is CORRECT

question 41

Multiple Choice

Which of the following statements is CORRECT?

• A) If a 10-year,$1,000 par,zero coupon bond were issued at a price that gave investors a 10% yield to maturity,and if interest rates then dropped to the point where r_d = YTM = 5%,the bond would sell at a premium over its $1,000 par value.
• B) If a 10-year,$1,000 par,10% coupon bond were issued at par,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 above its $1,000 par value.
• C) Other things held constant,including the coupon rate,a corporation would rather issue noncallable bonds than callable bonds.
• D) Other things held constant,a callable bond would have a lower required rate of return than a noncallable bond because it would have a shorter expected life.
• E) Bonds are exposed to both reinvestment risk and price risk.Longer-term low-coupon bonds,relative to shorter-term high-coupon bonds,are generally more exposed to reinvestment risk than price risk.

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Definitions:

Exhaustion Stage

The final phase of the General Adaptation Syndrome, characterized by the body's depletion of physical and psychological resources following prolonged stress.

Autonomic

Relating to the autonomic nervous system, which controls involuntary actions of the body such as heart rate and digestion.

Sympathetic

Relating to the sympathetic nervous system, which triggers the body's rapid involuntary response to dangerous or stressful situations; also means showing understanding or compassion toward others.

Alarm Phase

The initial phase of the stress response, where the body undergoes various physiological changes to combat stress.