Bonds and their valuation (Difficulty: e = Easy, m = Medium, and t = Tough) Multiple Choice: Conceptual



Download 1.16 Mb.
Page9/107
Date15.04.2021
Size1.16 Mb.
#56336
1   ...   5   6   7   8   9   10   11   12   ...   107
TB Chapter07
Bond concepts Answer: d Diff: E

17. An investor is considering buying one of two bonds issued by Carson City Airlines. Bond A has a 7 percent annual coupon, whereas Bond B has a
9 percent annual coupon. Both bonds have 10 years to maturity, face values of $1,000, and yields to maturity of 8 percent. Assume that the yield to maturity for both of the bonds will remain constant over the next 10 years. Which of the following statements is most correct?


  1. Bond A has a higher price than Bond B today, but one year from now the bonds will have the same price as each other.

  2. Bond B has a higher price than Bond A today, but one year from now the bonds will have the same price as each other.

  3. Both bonds have the same price today, and the price of each bond is expected to remain constant until the bonds mature.

  4. One year from now, Bond A’s price will be higher than it is today.

  5. Bond A’s current yield (not to be confused with its yield to maturity) is greater than 8 percent.



Download 1.16 Mb.

Share with your friends:
1   ...   5   6   7   8   9   10   11   12   ...   107




The database is protected by copyright ©ininet.org 2024
send message

    Main page