Multiple Choice
Bonds A and B are 15-year, $1,000 face value bonds. Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have a yield to maturity of 8%, which is expected to remain constant for the next 15 years. Which of the following statements is CORRECT?
A) one year from now, bond a's price will be higher than it is today.
B) bond a's current yield is greater than 8%.
C) bond a has a higher price than bond b today, but one year from now the bonds will have the same price.
D) both bonds have the same price today, and the price of each bond is expected to remain constant until the bonds mature.
E) bond b has a higher price than bond a today, but one year from now the bonds will have the same price.
Correct Answer:
Verified
Correct Answer:
Verified
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