Multiple Choice
You are considering two bonds. Bond A has a 9% annual coupon while Bond B has a 6% annual coupon. Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant. Which of the following statements is CORRECT?
A) The price of Bond B will decrease over time, but the price of Bond A will increase over time.
B) The prices of both bonds will remain unchanged.
C) The price of Bond A will decrease over time, but the price of Bond
B will increase over time.
D) The prices of both bonds will increase by 7% per year.
E) The prices of both bonds will increase over time, but the price of Bond A will increase by more.
Correct Answer:
Verified
Correct Answer:
Verified
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