Bond concepts Answer: c Diff: E
18. A 10-year bond with a 9 percent annual coupon has a yield to maturity of 8 percent. Which of the following statements is most correct?
a. The bond is selling at a discount.
b. The bond’s current yield is greater than 9 percent.
c. If the yield to maturity remains constant, the bond’s price one year from now will be lower than its current price.
d. Statements a and b are correct.
e. None of the statements above is correct.
Bond concepts Answer: a Diff: E N
19. Which of the following statements is most correct?
a. Long-term bonds have more interest rate price risk, but less reinvestment rate risk than short-term bonds.
b. Bonds with higher coupons have more interest rate price risk, but less reinvestment rate risk than bonds with lower coupons.
c. If interest rates remain constant for the next five years, the price of a discount bond will remain the same for the next five years.
d. Statements b and c are correct.
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