Which of the five statement is the most correct

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Problem 1: Which of these five statement is the most correct:

Option a. Other things held constant, a callable bond would have a lower required rate of return than a noncallable bond.

Option b. Other things held constant, a corporation would rather issue noncallable bonds than callable bonds.

Option c. Reinvestment rate risk is worse from a typical investor's standpoint than interest rate risk.

Option d. If a 10-year, RI 000 par, zero coupon bond were issued at a price which gave investors a 10 percent rate of return, and if interest rates then dropped to the point where rd = YTM = 5%, we could be sure that the bond would sell at a premium over its RI 000 par value.

Option e. If a 10-year, RI 000 par, zero coupon bond were issued at a price which gave investors a 10 percent rate of return, and if interest rates then dropped to the point where rd = YTM = 5%, we could be sure that the bond would sell at a discount below its RI 000 par value.

Reference no: EM132627986

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