Question: A 1 0 - year Treasury bond has a 1 2 % annual coupon, the 1 5 - year T - bond has an annual
A year Treasury bond has a annual coupon, the year Tbond has an annual coupon, the yield curve is flat, and all treasury securities have a yield to maturity. Which of the following statements would be accurate?
Question options:
a
If interest rates decline, the prices of both bonds will increase with the year bond having a larger percentage increase in price.
b
If the yield to maturity for both bonds remains steady at over the next year, the price of the year bond would increase, but the price of the year bond would fall.
c
The year bond would sell at a discount, while the year bond would sell at a premium.
d
The prices of both bonds will increase if interest rates decline with the year bond having a larger percentage increase in price.
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