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(Solution document) Bond yields and prices 4. Which of the following statements is CORRECT?


Bond yields and prices

4. Which of the following statements is CORRECT?


a. If two bonds have the same maturity, the same yield to maturity, and the same level of risk, the bonds should sell for the same price regardless of the bond's coupon rate.


b. All else equal, an increase in interest rates will have a greater effect on lower-coupon bonds than it will have on higher-coupon bonds.


c. All else equal, an increase in interest rates will have a greater effect on the prices of short-term bonds than it will on the prices of long-term bonds.


d. If a bond's yield to maturity exceeds its coupon rate, it would be considered a premium bond.


e. If a bond's coupon rate exceeds its yield to maturity, the bond's price must be less than its maturity value.

 







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