Select the statement that is most correct.

A firm with a low bond rating faces a less severe penalty when the Security Market Line $($SML$)$ is relatively steep than when it is not so steep.

A $20-$year original maturity bond with $1$ year left to maturity has more interest rate risk than a $10-$year original maturity bond with $1$ year left to maturity. $($Assume that the bonds have equal default risk and equal coupon rates.$)$

The prices of high$-$coupon bonds tend to be less sensitive to a given change in interest rates than lowcoupon bonds, other things equal and held constant. This is because, all other things equal, a highcoupon bond has a shorter duration than a low$-$coupon bond.

When a loan is amortized, the largest portion of the periodic payment goes to reduce principal in the early years of the loan such that the accumulated interest can be spread out over the life of the loan.

The effective annual rate is always greater than the nominal annual rate.