Miscellaneous concepts Answer: e Diff: M
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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