Bonds A, B, and C All Have a Maturity of 10

question 73

Multiple Choice

Bonds A, B, and C all have a maturity of 10 years and a yield to maturity of 7%.Bond A's price exceeds its par value, Bond B's price equals its par value, and Bond C's price is less than its par value.Which of the following statements is CORRECT?

• A)If the yield to maturity on each bond decreases to 6%, Bond A will have the largest percentage increase in its price.
• B)Bond A has the most interest rate risk.
• C)If the yield to maturity on the three bonds remains constant, the prices of the three bonds will remain the same over the next year.
• D)If the yield to maturity on each bond increases to 8%, the prices of all three bonds will decline.
• E)Bond C sells at a premium over its par value.

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