35
. Bond concepts Answer: d Diff: M
Statements a and c are correct; therefore, statement d is the correct choice. If inflation were to increase, interest rates would rise, thus bond prices would decline.
36 . Bond concepts Answer: b Diff: M
Statement b is correct; the other statements are false. If a bond is selling at a premium, the YTM would be less than the coupon rate. In addition, as long as interest rates are greater than zero, zeros should never trade above par.
37 . Bond concepts Answer: b Diff: M
Statement b is correct; the other statements are false. If a bond’s coupon rate > than the required rate, the bond will sell at a premium. A bond’s total return includes both an interest yield and a capital gains component, which represents the change in the price of the bond over a given year.
38
. Bond concepts Answer: e Diff: M
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