48. Which of the following statements is most correct? a. All else equal, a 1-year bond will have a higher (that is, better) bond rating than a 20-year bond. b. A 20-year bond with semiannual interest payments has higher price risk (that is, interest rate risk) than a 5-year bond with semiannual interest payments. c. 10-year zero coupon bonds have higher reinvestment rate risk than 10- year, 10 percent coupon bonds. d. If a callable bond were trading at a premium, then you would expect to earn the yield to maturity. e. Statements a and b are correct.
48. Which of the following statements is most correct? a. All else equal, a 1-year bond will have a higher (that is, better) bond rating than a 20-year bond. b. A 20-year bond with semiannual interest payments has higher price risk (that is, interest rate risk) than a 5-year bond with semiannual interest payments. c. 10-year zero coupon bonds have higher reinvestment rate risk than 10- year, 10 percent coupon bonds. d. If a callable bond were trading at a premium, then you would expect to earn the yield to maturity. e. Statements a and b are correct.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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48. Which of the following statements is most correct?
a. All else equal, a 1-year bond will have a higher (that is, better)
bond rating than a 20-year bond.
b. A 20-year bond with semiannual interest payments has higher price
risk (that is, interest rate risk) than a 5-year bond with semiannual
interest payments.
c. 10-year zero coupon bonds have higher reinvestment rate risk than 10-
year, 10 percent coupon bonds.
d. If a callable bond were trading at a premium, then you would expect
to earn the yield to maturity.
e. Statements a and b are correct.
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