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11 months ago
Bonds A, B, and C all have a maturity of 10 years and a yield to maturity of 9%. Bond A’s price is less than its par value, Bond B’s price equals its par value, and Bond C’s price is greater than its par value. Which statement regarding bonds is true?


▸

If the yield to maturity on each bond decreases to 8%, the prices of all three bonds will increase.



▸

If the yield to maturity on each bond increases to 10%, Bond C will have the largest percentage decrease in its price.



▸

If the yield to maturity on the three bonds remains constant, the prices of the three bonds will remain unchanged over the next year.



▸

Bond C has the most interest rate risk.

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
Authors:
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