Which of the following two bonds is more price sensitive to changes in interest rates?
1) A par-value bond, D, with a 2 year to maturity and an 8% coupon rate.
2) A zero-coupon bond, E, with a 2 year to maturity and an 8% yield to maturity.
A. Bond D because of the higher yield to maturity
B. Bond E because of the longer duration
C. Bond D because of the longer time to maturity
D. Both have the same sensitivity because both have the same yield to maturity.
B. Bond E because of the longer duration
Duration is the best measure of bond price sensitivity; the longer the duration the higher the price sensitivity.
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It costs a company $6 to manufacture a product. It sells the product for $10 to a wholesaler who in turn sells it to a retailer for $12. A customer of the retailer buys it for $24. What was the markup on selling price for each member of this product's channel of distribution?
A. Manufacturer's markup = 66.67 percent; wholesaler's markup = 20 percent; retailer's markup = 100 percent B. Manufacturer's markup = 60 percent; wholesaler's markup = 20 percent; retailer's markup = 100 percent C. Manufacturer's markup = 60 percent; wholesaler's markup = 23 percent; retailer's markup = 40 percent D. Manufacturer's markup = 40 percent; wholesaler's markup = 16.67 percent; retailer's markup = 50 percent E. Manufacturer's markup = 48 percent; wholesaler's markup = 18 percent; retailer's markup = 45 percent
Answer the following statements true (T) or false (F)
An argument supporting accounting regulation is that the production costs of mandatory reporting requirements may be small since most of the basic information is produced as a by-product of internal accounting systems.
Answer the following statements true (T) or false (F)
Flexibility is not often used in generally accepted accounting principles.