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

Question

Quizplus · Accepted Answer

Larger coupon bonds have higher cash flows in the short term, which means that they are more sensitive to changes in interest rates. Therefore, larger coupon bonds have greater Interest rate (price) risk compared to smaller coupon bonds.

Which of the Following Statements Is NOT CORRECT