Which of the following statements is CORRECT?

Question

Quizplus · Accepted Answer

The statement "All else equal, if a bond's yield to maturity increases, its price will fall" is correct because when the yield to maturity of a bond increases, it means that the bond is less attractive compared to newer, higher-yielding bonds and as a result, its price must decrease in order to be competitive. The other statements are incorrect - A is false because a zero coupon bond's current yield is always 0%, B is false because if a bond's yield to maturity exceeds its coupon rate, it must sell at a discount, not at par, D is false because if a bond's yield to maturity exceeds its coupon rate, it must sell at a discount, not at a premium, and E is false because as the yield to maturity of a bond increases, its current yield also increases.

Which of the Following Statements Is CORRECT