One of Carson City Airlines' two bonds is being considered by a businessman. Bond A offers a 7% annual coupon, while Bond B offers a 9% annual coupon. All bonds have a 10-year maturity, a $1,000 face value, and an 8% yield to maturity. Assume that all bonds' yields to maturity will stay stable for the next ten years. Which of the comments below is the most accurate? a. Bond A is now more expensive than Bond B, but the two bonds would be equal in price in a year. b. Now, Bond B is more expensive than Bond A, but in a year's time, the two bonds would be the same premium. c. The prices of all bonds are the same now, and the prices are supposed to stay the same before the bonds maturity. d. Bond A's price would be higher in a year than it is now. e. Bond A has a present yield of more than 8% (not to be mistaken with its yield to maturity).
One of Carson City Airlines' two bonds is being considered by a businessman. Bond A offers a 7% annual coupon, while Bond B offers a 9% annual coupon. All bonds have a 10-year maturity, a $1,000 face value, and an 8% yield to maturity. Assume that all bonds' yields to maturity will stay stable for the next ten years. Which of the comments below is the most accurate?
a. Bond A is now more expensive than Bond B, but the two bonds would be equal in price in a year.
b. Now, Bond B is more expensive than Bond A, but in a year's time, the two bonds would be the same premium.
c. The prices of all bonds are the same now, and the prices are supposed to stay the same before the bonds maturity.
d.
e. Bond A has a present yield of more than 8% (not to be mistaken with its yield to maturity).
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