A 15-Year Bond Has an Annual Coupon Rate of 8

A 15-year bond has an annual coupon rate of 8%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 6%. Which of the following statements is CORRECT?

A) the bond is currently selling at a price below its par value.
B) if market interest rates remain unchanged, the bond's price one year from now will be lower than it is today.
C) the bond should currently be selling at its par value.
D) if market interest rates remain unchanged, the bond's price one year from now will be higher than it is today.
E) if market interest rates decline, the price of the bond will also decline.

Correct Answer:

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