Which of the Following Statements Best Describes Interest Rates

question 135

Multiple Choice

Which of the following statements best describes interest rates?

• A)You hold two bonds. One is a 10-year, zero coupon issue, and the other is a 10-year bond that pays a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate rises from the current level, the zero coupon bond will experience the larger percentage decline.
• B)The time to maturity does not affect the change in the value of a bond in response to a given change in interest rates.
• C)The shorter the time to maturity, the greater the change in the value of a bond in response to a given change in interest rates.
• D)The longer the time to maturity, the smaller the change in the value of a bond in response to a given change in interest rates.

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Definitions:

Fastener

A hardware device that mechanically joins or affixes two or more objects together.

Arrowheads

Styled points at the end of dimension lines or leader lines on a drawing, indicating the feature to which the dimension or note refers.

Cutting-plane Lines

Lines on a drawing indicating the imaginary cut made through a part or assembly to reveal internal features in a sectional view.

Quarter Section

A method of dividing a piece of land into four equal parts in land surveying; also indicative of a technique in illustration where a portion is removed to reveal internal features.