Which of the following statements is CORRECT?
A) The total return on a bond during a given year is based only on the coupon interest payments received.
B) All else equal,a bond that has a coupon rate of 10% will sell at a discount if the required return for bonds of similar risk is 8%.
C) The price of a discount bond will increase over time,assuming that the bond's yield to maturity remains constant.
D) For a given firm,its debentures are likely to have a lower yield to maturity than its mortgage bonds.
E) When large firms are in financial distress,they are almost always liquidated,whereas smaller firms are generally reorganized.

Question

Quizplus · Accepted Answer

C) The price of a discount bond will increase over time, assuming that the bond's yield to maturity remains constant, is correct because as the bond approaches its maturity date, its price converges towards its face value, assuming constant yield to maturity.

Which of the Following Statements Is CORRECT