Which of the following statements is NOT CORRECT?
A)If a bond is selling at a discount to par, its current yield will be less than its yield to maturity.
B)All else equal, bonds with longer maturities have more interest rate (price) risk than bonds with shorter maturities.
C)If a bond is selling at its par value, its current yield equals its yield to maturity.
D)If a bond is selling at a premium, its current yield will be greater than its yield to maturity.
E)All else equal, bonds with larger coupons have greater interest rate (price) risk than bonds with smaller coupons.

Question

Quizplus · Accepted Answer

The statement that bonds with larger coupons have greater interest rate (price) risk than bonds with smaller coupons is NOT CORRECT. Bonds with larger coupons have less interest rate (price) risk than bonds with smaller coupons because a larger coupon helps to offset the potential for a decrease in the bond's price due to rising interest rates.

Which of the Following Statements Is NOT CORRECT