Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The price of a discount bond will increase over time assuming that the bond's yield to maturity remains constant because as the bond approaches maturity, the difference between the discounted price and the face value decreases, resulting in a higher price. Option A is incorrect because the total return on a bond consists of both coupon interest payments and any capital gains or losses from changes in the bond's price. Option C is incorrect because mortgage bonds are secured by the property of the issuer, resulting in a lower risk for investors and therefore a lower yield to maturity. Option D is incorrect because the outcome of financial distress depends on a variety of factors, including the size of the company but is not dependent upon it.

Which of the Following Statements Is Correct