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E
E. Assuming a one year investment, the formulation for arriving at return is either FV, = PV + kPV or FV, = PV(1+k).
E. The longer the time to maturity, the smaller the maturity risk associated with a bond.
E. The term coupon originated long ago when coupons were attached to bonds. When interest was due a bondholder would clip off a coupon and send it to the bond issuing company which would return an interest payment.
E. Restrictive covenants increase risk to the bondholder.
E. Bond ratings are primarily based on the issuing firm's financial projections.
Expert Solution
1.
The statement is true
returns=Future Value/Present Value-1
=>FV1=PV*(1+k)
2.
The statement is false
The longer the maturity higher is the maturity risk
3.
The statement is true
4.
The statement is false
Restrictive covenants decrease risk to the bondholder
5.
The statement is false
Bond ratings also depend on the current financials
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