Question: Bond A has a 9 % annual coupon, while Bond B has a 7 % annual coupon. Both bonds have the same maturity, a face
Bond A has a annual coupon, while Bond B has a annual coupon. Both bonds have the same maturity, a face value of $ and an yield to maturity. Which of the following statements is CORRECT?
Question options:
a
Both bonds trade at par value.
b
Bond B trades at a discount, whereas Bond A trades at a premium.
c
If the yield to maturity for both bonds immediately decreases to Bond As bond will have a larger percentage increase in value.
d
Bond A trades at a discount and Bond B trades at a discount too.
e
Bond A trades at a premium and Bond B trades at a premium too.
f
Bond A trades at a discount, whereas Bond B trades at a premium.
g
If the yield to maturity for both bonds remains at Bond As price one year from now will be higher than it is today, but Bond Bs price one year from now will be lower than it is today.
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