Solved

Consider Each of the Following Bonds: Bond A 8\quad 8 -Year Maturity with A

Question 56

Multiple Choice

Consider each of the following bonds: Bond A: 8\quad 8 -year maturity with a 7%7 \% annual coupon.
Bond B: 10\quad 10 -year maturity with a 9%9 \% annual coupon.
Bond C: 12\quad 12 -year maturity with a zero coupon. Each bond has a face value of $1,000 and a yield to maturity of 8%. Which of the following statements is NOT correct?


A) Bond A sells at a discount, while Bond B sells at a premium.
B) If the yield to maturity on each bond falls to 7%, Bond C will have the largest percentage increase in its price.
C) Bond C has the most reinvestment risk.
D) Bond C has the most price risk.
E) If the yield to maturity is constant, the price of Bond A will continue to increase over its life until it finally sells at par.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents