15-Year Bond Has an Annual Coupon Rate of 8% the Coupon

question 24

Multiple Choice

15-year bond has an annual coupon rate of 8% The coupon rate will remain fixed until the bond matures The bond has a yield to maturity of 6% Which of the following statements is CORRECT?

• A) The bond is currently selling at a price below its par value.
• B) If market interest rates remain unchanged, the bond's price one year from now will be lower than it is today.
• C) The bond should currently be selling at its par value.
• D) If market interest rates remain unchanged, the bond's price one year from now will be higher than it is today.
• E) If market interest rates decline, the price of the bond will also decline.

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Definitions:

Coupon Rate

The interest rate stated on a bond when issued, which represents the amount of interest paid to bondholders annually.

Interest Rates

The percentage of a sum of money charged for its use, determining the cost of borrowing or the return on savings.

Bond's Price

The market price at which a bond is currently trading. This price can fluctuate based on interest rates, the bond's credit rating, and other factors.

Future Cash Flows

Estimated future financial earnings or expenditures, often used in investment analysis to determine value or profitability.