21. A 10-year bond pays an annual coupon. The bond has a yield to maturity of 8 percent. The bond currently trades at a premium--its price is above the par value of $1,000. Which of the following statements is most correct? a. If the yield to maturity remains at 8 percent, then the bond’s price will decline over the next year. b. The bond’s current yield is less than 8 percent. c. If the yield to maturity remains at 8 percent, then the bond’s price will remain the same over the next year. d. The bond’s coupon rate is less than 8 percent. e. If the yield to maturity increases, then the bond’s price will increase.
21. A 10-year bond pays an annual coupon. The bond has a yield to maturity of 8 percent. The bond currently trades at a premium--its price is above the par value of $1,000. Which of the following statements is most correct? a. If the yield to maturity remains at 8 percent, then the bond’s price will decline over the next year. b. The bond’s current yield is less than 8 percent. c. If the yield to maturity remains at 8 percent, then the bond’s price will remain the same over the next year. d. The bond’s coupon rate is less than 8 percent. e. If the yield to maturity increases, then the bond’s price will increase.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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21. A 10-year bond pays an annual coupon. The bond has a yield to maturity
of 8 percent. The bond currently trades at a premium--its price is
above the par value of $1,000. Which of the following statements is
most correct?
a. If the yield to maturity remains at 8 percent, then the
will decline over the next year.
b. The bond’s current yield is less than 8 percent.
c. If the yield to maturity remains at 8 percent, then the bond’s price
will remain the same over the next year.
d. The bond’s coupon rate is less than 8 percent.
e. If the yield to maturity increases, then the bond’s price will
increase.
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