KJJ Ltd has recently issued bonds paying a fixed annual coupon of 10% p.a. and maturing in 10 years’ time. The yield to maturity on these bonds is 8% p.a. If market interest rates falls unexpectedly, what is most likely to happen to the price of the bonds? A. The bonds will now trade at par. B. The bonds will now trade at a premium. C. The bonds will now trade at a discount. D. One cannot say anything about the price of the bonds without additional information.
KJJ Ltd has recently issued bonds paying a fixed annual coupon of 10% p.a. and maturing in 10 years’ time. The yield to maturity on these bonds is 8% p.a. If market interest rates falls unexpectedly, what is most likely to happen to the price of the bonds? A. The bonds will now trade at par. B. The bonds will now trade at a premium. C. The bonds will now trade at a discount. D. One cannot say anything about the price of the bonds without additional information.
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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KJJ Ltd has recently issued bonds paying a fixed annual coupon of 10% p.a. and maturing in
10 years’ time. The yield to maturity on these bonds is 8% p.a. If market interest rates falls
unexpectedly, what is most likely to happen to the price of the bonds?
10 years’ time. The yield to maturity on these bonds is 8% p.a. If market interest rates falls
unexpectedly, what is most likely to happen to the price of the bonds?
A. The bonds will now trade at par.
B. The bonds will now trade at a premium.
C. The bonds will now trade at a discount.
D. One cannot say anything about the price of the bonds without additional information.
D. One cannot say anything about the price of the bonds without additional information.
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