Which of the following statements is CORRECT?
A) If a coupon bond is selling at par,its current yield equals its yield to maturity.
B) If a coupon bond is selling at a discount,its price will continue to decline until it reaches its par value at maturity.
C) If interest rates increase,the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond.
D) If a bond's yield to maturity exceeds its annual coupon,then the bond will trade at a premium.
E) If a coupon bond is selling at a premium,its current yield equals its yield to maturity.

Question

Quizplus · Accepted Answer

A coupon bond selling at par means its market price equals its face value. In this scenario, the bond's current yield, which is the annual coupon payments divided by the bond's price, equals its yield to maturity (YTM) because the YTM is the interest rate that makes the present value of all future cash flows equal to the bond's price. When a bond sells at par, these two rates are the same because the coupon rate (which determines the current yield) is equal to the YTM.

Which of the Following Statements Is CORRECT