Question: Bond A has a 9% annual coupon, while Bond B has a 7% annual coupon. Both bonds have the same maturity, a face value of

Bond A has a 9% annual coupon, while Bond B has a 7% annual coupon. Both bonds have the same maturity, a face value of $1,000, and an 8% yield to maturity. Which of the following statements is CORRECT:

A. Bond A trades at a discount, whereas Bond B trades at a premium.

B. If market interest rates increase, Bond As price will increase, and Bond Bs price will decline.

C. If the yield to maturity on each bond increases to 9%, the price of both bonds will decrease.

D. none of the above is correct.

E. A and B are both correct

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