Bond A is a 20-year Treasury bond has a 12% annual coupon, while Bond B is a 25-year T-bond has an 8% annual coupon. Both bonds have a 11% yield to maturity. Which statement is correct? Group of answer choices Both A nd B will sell at par. A will sell at discount and B will sell at premium. If interest rates decline, the prices of both bonds will increase, but Bond B would have a larger percentage increase in price. If interest rates increase, the prices of both bonds will increase, but Bond B would have a smaller percentage increase in price.
Bond A is a 20-year Treasury bond has a 12% annual coupon, while Bond B is a 25-year T-bond has an 8% annual coupon. Both bonds have a 11% yield to maturity. Which statement is correct? Group of answer choices Both A nd B will sell at par. A will sell at discount and B will sell at premium. If interest rates decline, the prices of both bonds will increase, but Bond B would have a larger percentage increase in price. If interest rates increase, the prices of both bonds will increase, but Bond B would have a smaller percentage increase in 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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Bond A is a 20-year Treasury bond has a 12% annual coupon, while Bond B is a 25-year T-bond has an 8% annual coupon. Both bonds have a 11% yield to maturity. Which statement is correct?
Group of answer choices
Both A nd B will sell at par.
A will sell at discount and B will sell at premium.
If interest rates decline, the prices of both bonds will increase, but Bond B would have a larger percentage increase in price.
If interest rates increase, the prices of both bonds will increase, but Bond B would have a smaller percentage increase in price.
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