Please use the grid provided on page two of the Candidate Answer Booklet to record your answers to each multiple choice question. Do not write out the answers to the MCQs on the lined pages of the answer booklet.
Each question is worth 2 marks.

In relation to an irredeemable security paying a fixed rate of interest, which of the following statements is correct?
A As risk rises, the market value of the security will fall to ensure that investors receive an increased yield
B As risk rises, the market value of the security will fall to ensure that investors receive a reduced yield
C As risk rises, the market value of the security will rise to ensure that investors receive an increased yield
D As risk rises, the market value of the security will rise to ensure that investors receive a reduced yield

Answer:

A
As risk rises, the market value of the security will fall to ensure that investors receive an increased yield.

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