68 365
Assignments Done
98,7%
Successfully Done
In November 2018

Answer to Question #23061 in Finance for carlos jimenez

Question #23061
Which of the following statements is CORRECT?
a. Assume that two bonds have equal maturities and are of equal risk, but one bond sells at par
while the other sells at a premium above par. The premium bond must have a lower current
yield and a higher capital gains yield than the par bond.
b. A bond’s current yield must always be either equal to its yield to maturity or between its yield
to maturity and its coupon rate.
c. If a bond sells at par, then its current yield will be less than its yield to maturity.
d. If a bond sells for less than par, then its yield to maturity is less than its coupon rate.
e. A discount bond’s price declines each year until it matures, when its value equals its par
value.
Expert's answer
Answer:
b) is a correct answer.
Because:
a discount: YTM > current yield > coupon yield
a premium: coupon yield > current yield > YTM
par: YTM = current yield = coupon yield.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

Submit
Privacy policy Terms and Conditions