Asked by
23_ H_SHAILEY DRAVID
on Nov 28, 2024
Verified
A 12-year bond has an annual coupon rate of 9%.The coupon rate will remain fixed until the bond matures.The bond has a yield to maturity of 7%.Which statement regarding the bond's price is true?
A) If market interest rates decline, the price of the bond will also decline.
B) The bond is currently selling at a price below its par value.
C) If market interest rates remain unchanged, the bond's price one year from now will be lower than it is today.
D) The bond should currently be selling at its par value.
Coupon Rate
The yearly interest yield from a bond, shown as a percentage of its nominal value.
Yield To Maturity
The total return anticipated on a bond if it is held until the end of its lifetime, factoring in its current market price, face value, interest rate, and time to maturity.
Market Interest Rates
The prevailing rates at which borrowers can obtain loans and lenders can invest funds in the broader financial market.
- Study the influence of market interest rates on both the prices and yield rates of bonds.
- Examine the interconnection between the term to maturity of bonds, their price instability, and the risk associated with varying interest rates.
Verified Answer
GA
Learning Objectives
- Study the influence of market interest rates on both the prices and yield rates of bonds.
- Examine the interconnection between the term to maturity of bonds, their price instability, and the risk associated with varying interest rates.