A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT? Group of answer choices If the yield to maturity remains constant, the bond's price one year from now will be lower than its current price. The bond is selling below its par value. The bond is selling at a discount. The bond's current yield is greater than 9%. If the yield to maturity remains constant, the bond's price one year from now will be higher than its current price.
A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT? Group of answer choices If the yield to maturity remains constant, the bond's price one year from now will be lower than its current price. The bond is selling below its par value. The bond is selling at a discount. The bond's current yield is greater than 9%. If the yield to maturity remains constant, the bond's price one year from now will be higher than its current price.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT?
Group of answer choices
If the yield to maturity remains constant, the bond's price one year from now will be lower than its current price.
The bond is selling below its par value.
The bond is selling at a discount.
The bond's current yield is greater than 9%.
If the yield to maturity remains constant, the bond's price one year from now will be higher than its current price.
Expert Solution
Step 1 Introduction
This question provides that the Coupon rate is higher than the yield to maturity. It means the bond is selling at a premium.
Therefore the return yearly is more than the yield to maturity it implies the bond is trading at higher values, so in one year the values tend to become lower than the current value of the bond.
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