Bond Yields, Interest Rates and Bond Prices
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Which statement is most correct:
a. if a bonds yield to maturity exceeds its annual coupon, then the bond will be trading at a premium
b. if interest rates increase the relative b, price change of a 10 year coupon bond will be greater than the relative price change of a 10 year zero bond
c. if a coupon bond is selling at par its current yield equal its yield to maturity.
d. both a and c are correct
e. none are correct
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Solution Summary
The solution explains what bond yield statement is correct.
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a.if a bonds yield to maturity exceeds its annual coupon, then the bond will be trading at a premium: This is not correct. If the bond investors are demanding a greater yield than the bond is providing at par value, they will pay less than par value (i.e., a discount) in order to achieve ...
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