41. Bond concepts Answer: b Diff: M N
The correct answer is statement b. If the YTM remains constant, the price of Bond A will still exceed par, the price of Bond B will equal par, and the price of Bond C will be below par. So, statement a is incorrect. As the YTM rises, the price of all bonds will decrease. So, statement b is correct. If the YTM decreases, Bond C will have the largest percentage increase in price since its price is the lowest of the three bonds. Bond B will follow, and Bond A will have the lowest percentage increase in price. So, statement c is incorrect.
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