Which of the following statements is CORRECT?Single choice

A

A. As a general rule, a company's debentures have higher required interest rates than its mortgage bonds because mortgage bonds are backed by specific assets while debentures are unsecured.

B

B. Because short-term interest rates are much more volatile than long-term rates, you would, in the real world, generally be subject to much more price risk if you purchased a 30-day bond than if you bought a 30-year bond.

C

C. There is a positive relationship between bonds' quality ratings and their required rates of return. Thus, the required return is highest for AAA-rated bonds, and required returns decrease as the ratings get lower.

D

D. Income bonds pay interest only if the issuing company actually earns the indicated interest. Thus, these securities cannot bankrupt a company, and this makes them safer from an investor's perspective than regular bonds.

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