10-Year Bond Pays an Annual Coupon, Its YTM Is 8

question 36

Multiple Choice

10-year bond pays an annual coupon, its YTM is 8%, and it currently trades at a premium.Which of the following statements is CORRECT?

• A)The bond's current yield is less than 8%.
• B)If the yield to maturity remains at 8%, then the bond's price will decline over the next year.
• C)The bond's coupon rate is less than 8%.
• D)If the yield to maturity increases, then the bond's price will increase.
• E)If the yield to maturity remains at 8%, then the bond's price will remain constant over the next year.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that is expected not to be collected.

Percentage-of-Receivables Basis

A method used in accounting to estimate the amount of accounts receivable that will not be collected by applying a percentage based on historical data.

Bad Debt Expense

A cost reported on the income statement, reflecting credit sales that are not expected to be collected.

Retailer

A business entity that sells goods or merchandise directly to consumers.