17. An investor is considering buying one of two bonds issued by Carson City Airlines. Bond A has a 7 percent annual coupon, whereas Bond B has a 9 percent annual coupon. Both bonds have 10 years to maturity, face values of $1,000, and yields to maturity of 8 percent. Assume that the yield to maturity for both of the bonds will remain constant over the next 10 years. Which of the following statements is most correct? a. Bond A has a higher price than Bond B today, but one year from now the bonds will have the same price as each other. b. Bond B has a higher price than Bond A today, but one year from now the bonds will have the same price as each other. c. Both bonds have the same price today, and the price of each bond is expected to remain constant until the bonds mature. d. One year from now, Bond A’s price will be higher than it is today. e. Bond A’s current yield (not to be confused with its yield to maturity) is greater than 8 percent.
17. An investor is considering buying one of two bonds issued by Carson City
Airlines. Bond A has a 7 percent annual coupon, whereas Bond B has a
9 percent annual coupon. Both bonds have 10 years to maturity, face
values of $1,000, and yields to maturity of 8 percent. Assume that the
yield to maturity for both of the bonds will remain constant over the
next 10 years. Which of the following statements is most correct?
a. Bond A has a higher price than Bond B today, but one year from now
the bonds will have the same price as each other.
b. Bond B has a higher price than Bond A today, but one year from now
the bonds will have the same price as each other.
c. Both bonds have the same price today, and the price of each bond is
expected to remain constant until the bonds mature.
d. One year from now,
e. Bond A’s current yield (not to be confused with its yield to
maturity) is greater than 8 percent.
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