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Question 84/145
Which of the following statements regarding bonds is correct?
I. Interest rates on bonds are typically stated on an annualized rate.
II. Bonds can pay floating coupons that are directly linked to various interest rate indices.
III. Convertible bonds have an element of prepayment risk.
IV. Callable bonds have an element of equity risk.
I. Interest rates on bonds are typically stated on an annualized rate.
II. Bonds can pay floating coupons that are directly linked to various interest rate indices.
III. Convertible bonds have an element of prepayment risk.
IV. Callable bonds have an element of equity risk.
Correct Answer: C
* Interest rates on bonds are typically stated on an annualized rate (I).
* Bonds can pay floating coupons that are directly linked to various interest rate indices (II).
* Convertible bonds have an element of prepayment risk (III).
* Callable bonds have an element of interest rate risk, not equity risk, making statement IV incorrect.
* Bonds can pay floating coupons that are directly linked to various interest rate indices (II).
* Convertible bonds have an element of prepayment risk (III).
* Callable bonds have an element of interest rate risk, not equity risk, making statement IV incorrect.
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