Question

In: Finance

Which of the following statement regarding interest rate risk is true? A. Interest rate risk is...

Which of the following statement regarding interest rate risk is true? A. Interest rate risk is a positive relationship between bond price and interest rate. B. The longer the maturity, the lower the interest rate risk. C. The higher the coupon rate, the higher the interest rate risk. D. The higher the coupon rate, the lower the interest rate risk

Solutions

Expert Solution

D. is true, because higher the coupon lower is the duration which is a measure of interest rate risk ( nod price sensitivity to change in interest rate)


Related Solutions

Which of the following is not a true statement regarding the attractiveness of interest rate swaps...
Which of the following is not a true statement regarding the attractiveness of interest rate swaps compared to financial futures? A. Swaps may be less attractive if the secondary market is not as deep as the futures markets, so it is more difficult or costly to exit a swap position B. Interest rate swaps are more attractive than futures because they have shorter maturities and require marking the market C. Interest rate swaps may be more attractive than futures because...
Which of the following statements regarding risk is(are) CORRECT? I. Interest rate risk is the variability...
Which of the following statements regarding risk is(are) CORRECT? I. Interest rate risk is the variability of a security’s returns resulting from changes in interest rates. II. Inflation risk, or purchasing power risk, is the variability of security returns caused by the decline in the purchasing power of invested dollars. I only II only Both I and II Neither I nor II
Which of the following is true regarding interest?a) Interest payable increases by the amount of...
Which of the following is true regarding interest?a) Interest payable increases by the amount of interest expense each year.b) When interest is paid, both interest payable and interest expenses are reduced.c)The balance of interest payable reduces net income in every period.d) Inerest expense and interest payable should always have the same balance.
Which of the following is TRUE about interest rates? A LIBOR rate is the only risk-free...
Which of the following is TRUE about interest rates? A LIBOR rate is the only risk-free rate proxy that is used extensively by derivatives traders after the credit crisis that started in 2007. Par yield is the coupon rate that causes the bond price to equal to is market value. Bond yield is the single discount rate that gives the value of the bond equal to its par (or principal) value. Treasury rate is considered to be artificially low and...
which statement is true regarding diversification a. The greater systematic risk, the greater return should be...
which statement is true regarding diversification a. The greater systematic risk, the greater return should be required b. systematic risk is diversifiable c. portfolio diversification address systematic risk d. none of the above
Which of the following is a TRUE statement regarding the treatment of scrap by a​ firm?...
Which of the following is a TRUE statement regarding the treatment of scrap by a​ firm? A. Revenue received from the sale of scrap on a job lowers the total costs for that job. B. Scrap is always allocated to a specific job. C. Scrap is separated between normal and abnormal scrap. D. There are costs assigned to scrap.
Which of the following is a true statement regarding the taxation of compensation received in the...
Which of the following is a true statement regarding the taxation of compensation received in the form of restricted property A) an employee is not taxed on compensation received in the form of restricted property B) an employee recognizes no income until the property is either (1) no longer subject to a substantial risk of forfeiture or (2) becomes transferable free of the risk,whichever occurs earlier c) an employee who receives restricted property may not elect to recognize income immediately...
Which of the following is not a true statement regarding macroevolution? a. Macroevolution and microevolution are...
Which of the following is not a true statement regarding macroevolution? a. Macroevolution and microevolution are different. b. An example of stasis is Nautilus belauensis because the species has exhibited little change over time. c. The patterns of macroevolution include lineage-splitting, stasis, reincarnation, and extinction. d. Every lineage has some chance of extinction and 99% of the species that have ever lived on earth have gone extinct. e. Over time a lineage-split can lead to a new species.
Which of the following statements is true about EVE (economic value of equity) interest rate risk...
Which of the following statements is true about EVE (economic value of equity) interest rate risk models? They express risk in terms of cumulative gap. They only reflect risk over a short horizon, such as a year. They express interest rate risk in terms of potential change in the theoretical value of the bank. Which of the following statements is true regarding capital requirements for banks? Lower capital levels reduce the risk of bank failures. Higher capital levels reduce risk...
Which statement regarding macroeconomics and microeconomics is TRUE?
 Which statement regarding macroeconomics and microeconomics is TRUE?  Neither macroeconomics nor microeconomics is concerned with prices.  Because it focuses on national economies, macroeconomics does not study international trade and finance. O Microeconomics examines consumer behavior, while macroeconomics studies business behavior.  Macroeconomics employs many of the same analytical tools as microeconomics. Prices typically contain more useful information for buyers than for sellers.  False  True A market is a physical location that enables buyers and sellers to interact and transact with one another.  True ...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT