Falling interest rate leads change to bondholder income which is__________?
Correct answer: A. Reduction in income
- A. Reduction in income
- B. Increment in income
- C. Matured income
- D. Frequent income
Explanation
Falling interest rates reduce the return available when coupon payments are reinvested, so the bondholder's overall income may decline. The original fixed coupon on an existing bond does not itself change, but reinvestment income does.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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