Consider two bonds,Bond A and Bond B,offered for sale in the same market for financial assets: - Bond A has a face value of $1000,a market price of $971,and matures in one year.
- Bond B has a face value of $1000,a market price of $926,and matures in one year.
Which of the following statements about Bonds A and B are correct?

Question

Quizplus · Accepted Answer

The yield of a bond is calculated based on its market price, face value, and maturity. Bond A, with a market price of $971 and maturing in one year at a face value of $1000, offers a yield of approximately 3% (($1000 - $971) / $971). Bond B, with a market price of $926 and maturing in one year at a face value of $1000, offers a yield of approximately 8% (($1000 - $926) / $926). This calculation shows that Bond B has a higher yield due to its lower purchase price relative to its redemption value, not present value or market disequilibrium.

Consider Two Bonds,Bond a and Bond B,offered for Sale in the Same