Sarafina has bonds in her portfolio. She wants to know about her position in the bond market. Specifically, when dealing with the bond market, will she fare better when the yield to maturity increases or when it decreases? As such, her portfolio manager would tell her that bondholders fare better when the yield to maturity: O A. increases, since this represents a decrease in the bond maturity and a decrease in potential capital losses. O B. decreases, since this represents an increase in the price of the bond and a decrease in potential capital losses. O C. increases, since this represents a decrease in the price of the bond and an increase in potential capital gains. O D. decreases, since this represents an increase in the coupon payment and a increase in potential capital gains.

Sarafina has bonds in her portfolio. She wants to know about her position in the bond market. Specifically, when dealing with the bond market, will she fare better when the yield to maturity increases or when it decreases? As such, her portfolio manager would tell her that bondholders fare better when the yield to maturity: O A. increases, since this represents a decrease in the bond maturity and a decrease in potential capital losses. O B. decreases, since this represents an increase in the price of the bond and a decrease in potential capital losses. O C. increases, since this represents a decrease in the price of the bond and an increase in potential capital gains. O D. decreases, since this represents an increase in the coupon payment and a increase in potential capital gains.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter16: Capital Structure Decisions

Section: Chapter Questions

Problem 11MC: What is the value of Ls stock for volatilities between 0.20 and 0.95? What incentives might the...

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