Which of the following statements is CORRECT?
A. One advantage of a zero coupon Treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold.
B. Long-term bonds have less price risk but more reinvestment risk than short-term bonds.
C. If interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less price risk.
D. Relative to a coupon-bearing bond with the same maturity, a zero coupon bond has more price risk but less reinvestment risk.
E. Long-term bonds have less price risk and also less reinvestment risk than short-term bonds.
Answer: D
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A) appendix B) executive summary C) glossary D) table of contents E) cover letter
Stock A has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%. Stock B also has a beta of 1.2, but its expected return is 10% and its standard deviation is 15%. Portfolio AB has $300,000 invested in Stock A and $100,000 invested in Stock B. The correlation between the two stocks' returns is zero (that is, rA,B = 0). Which of the following statements is CORRECT?
A. The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is overvalued. B. The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is undervalued. C. Portfolio AB's expected return is 11.0%. D. Portfolio AB's beta is less than 1.2. E. Portfolio AB's standard deviation is 17.5%.
The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers
Indicate whether the statement is true or false
Which of the following is the amount the borrower must pay back to the bondholders at maturity?
A) market value B) present value C) stated interest value D) principal amount