Which of the following observations is the most accurate? a. As interest rates rise, the price of a 10-year zero coupon bond would fall by a larger amount than the price of a 10-year 8 percent coupon bond. b. One of the benefits of zero coupon bonds is that private borrowers do not have to pay taxes on them before they expire, particularly though they are not keeping them in a tax-deferred portfolio. c. Where the yield to maturity on a bond with a sinking fund clause is higher than the coupon rate, the borrowing party will have to comply with the sinking fund by calling the bonds in at par rather than purchasing them back on the open market. d. All a and c are valid statements. e. All of the above claims are true.
7A-1.
Which of the following observations is the most accurate?
a. As interest rates rise, the price of a 10-year zero coupon bond would fall by a larger amount than the price of a 10-year 8 percent coupon bond.
b. One of the benefits of zero coupon bonds is that private borrowers do not have to pay taxes on them before they expire, particularly though they are not keeping them in a tax-deferred portfolio.
c. Where the yield to maturity on a bond with a sinking fund clause is higher than the coupon rate, the borrowing party will have to comply with the sinking fund by calling the bonds in at par rather than purchasing them back on the open market.
d. All a and c are valid statements.
e. All of the above claims are true.
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