A Bond's Price and Its Yield to Maturity Are Inversely

question 22

Multiple Choice

A bond's price and its yield to maturity are inversely related because

• A)discounting future payments at a higher rate reduces the present value of the payments.
• B)discounting future payments at a higher rate increases the present value of the payments.
• C)an increase in the yield to maturity will lower a bond's coupon rate and hence its price.
• D)a fall in a bond's price will lower its par value and hence its yield to maturity.

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Meters

A metric unit of length equal to 100 centimeters.

Fencing

The sport of fighting with swords (epee, foil, or sabre) or the practice of enclosing an area with a barrier for protection or privacy.

Storage Lot

A designated outdoor or indoor space used for storing vehicles, equipment, or other goods.

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A unit of mass in the metric system, equivalent to one thousand grams.