Which of the Following Statements Is CORRECT

question 85

Multiple Choice

Which of the following statements is CORRECT?

• A) If a coupon bond is selling at par,its current yield equals its yield to maturity.
• B) If a coupon bond is selling at a discount,its price will continue to decline until it reaches its par value at maturity.
• C) If interest rates increase,the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond.
• D) If a bond's yield to maturity exceeds its annual coupon,then the bond will trade at a premium.
• E) If a coupon bond is selling at a premium,its current yield equals its yield to maturity.

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Definitions:

Common Shares

Equity securities that represent ownership interests in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Replacement Cost

The current cost of replacing an asset with a similar one at its current market value.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, often represented by the yield on government securities like U.S. Treasury bonds.

Market Portfolio

A theoretical portfolio that contains all assets in the market, with each asset weighted according to its market capitalization.