A 10-Year Bond with a 9% Annual Coupon Has a Yield

question 31

Multiple Choice

A 10-year bond with a 9% annual coupon has a yield to maturity of 8%.Which of the following statements is CORRECT?

• A) If the yield to maturity remains constant,the bond's price one year from now will be higher than its current price.
• B) The bond is selling below its par value.
• C) The bond is selling at a discount.
• D) If the yield to maturity remains constant,the bond's price one year from now will be lower than its current price.
• E) The bond's current yield is greater than 9%.

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Definitions:

Marginal Cost Curve

A graphical representation showing how the cost of producing one more unit changes as production levels change.

MR Curve

Stands for Marginal Revenue Curve, which shows how the revenue changes with the sale of one additional unit of a product.

Profit-Maximizing

The approach a company takes to determine the most profitable pricing and output combination.

Deadweight Loss

An inefficiency in the market that occurs when supply and demand are out of balance, resulting in lost economic opportunity.