Bond X has an 8% annual coupon,Bond Y has a 10% annual coupon,and Bond Z has a 12% annual coupon.Each of the bonds has a maturity of 10 years and a yield to maturity of 10%.Which statement regarding bonds is true?
A) If the bonds' market interest rate remains at 10%, Bond Z's price will be lower 1 year from now than it is today.
B) Bond X has the greatest reinvestment rate risk.
C) If market interest rates remain at 10%, Bond Z's price will be 10% higher 1 year from today.
D) If market interest rates increase, Bond X's price will increase, Bond Z's price will decline, and Bond Y's price will remain the same.
Correct Answer:
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