Which of the following is NOT true regarding bonds? If a bond is selling at a discount, then the current yield is greater than the yield-to-maturity. An increase in market interest rates leads to a decrease in bond prices. If the coupon rate on a bond is lower than the yield-to-maturity, the bond sells at a discount. If the coupon rate on a bond equals the yield-to-maturity, then the bond sells at par.
Which of the following is NOT true regarding bonds? If a bond is selling at a discount, then the current yield is greater than the yield-to-maturity. An increase in market interest rates leads to a decrease in bond prices. If the coupon rate on a bond is lower than the yield-to-maturity, the bond sells at a discount. If the coupon rate on a bond equals the yield-to-maturity, then the bond sells at par.
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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Transcribed Image Text:Which of the following is NOT true regarding bonds?
O If a bond is selling at a discount, then the current yield is greater than the yield-to-maturity.
An increase in market interest rates leads to a decrease in bond prices.
O If the coupon rate on a bond is lower than the yield-to-maturity, the bond sells at a discount.
O If the coupon rate on a bond equals the yield-to-maturity, then the bond sells at par.
Expert Solution
Introduction,
Bonds are fixed-income assets that serve as a representation of investor loans to borrowers (typically corporate or governmental). A bond is analogous to a contract outlining the terms of a loan and the associated payments between a lender and borrower. Corporations, towns, cities, states, and other sovereign governments utilise bonds to finance projects and operations. Bondholders are the issuer's borrowers or creditors. Bond specifications sometimes include the terms for the borrower's variable or fixed interest payments as well as the estimated date by which the loan's principal will be paid back to the bond owner.
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