Which of the following statements is false?
A) By convention, practitioners always plot the yield of the most senior issued bonds, termed the on-the-run-bonds.
B) We can determine the no-arbitrage price of a coupon bond by discounting its cash flows using the zero-coupon yields.
C) If the zero-coupon yield curve is upward sloping, the resulting yield to maturity decreases with the coupon rate of the bond.
D) The yield to maturity of a coupon bond is a weighted average of the yields on the zero-coupon bonds.

Question

Quizplus · Accepted Answer

A is false because practitioners typically plot the yield of the most recently issued (on-the-run) bonds, not necessarily the most senior. The terms "on-the-run" and "most senior" refer to different characteristics; "on-the-run" refers to the most recently issued bonds, while "most senior" refers to the priority in the capital structure.

Which of the Following Statements Is False