Which of the following statements best describes bond yields?

Question

Quizplus · Accepted Answer

Bond yields and prices have an inverse relationship. As yields increase, prices decrease and vice versa. This means that as a bond's yield to maturity increases, its price will fall. Option A is incorrect because the current yield of a zero coupon bond is always 0%. Option B is incorrect because if the bond's yield to maturity exceeds its coupon rate, it will sell at a discount, not at par. Option D is incorrect because if the bond's yield to maturity exceeds its coupon rate, it will sell at a discount, not at a premium.

Which of the Following Statements Best Describes Bond Yields