A 12-Year Bond Has an Annual Coupon of 9

question 48

Multiple Choice

A 12-year bond has an annual coupon of 9%.The coupon rate will remain fixed until the bond matures.The bond has a yield to maturity of 7%.Which of the following statements is CORRECT?

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

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Definitions:

Management Report

Internal documents prepared by a company's management containing detailed financial and operational information.

Financial Statements

Written reports that quantitatively describe the financial health of a company, including the balance sheet, income statement, and cash flow statement.

Control Deficiencies

Refers to weaknesses in a company's internal controls that could lead to operational inefficiencies or financial misstatements.