Bond a Has a 9% Annual Coupon,while Bond B Has

question 53

Multiple Choice

Bond A has a 9% annual coupon,while Bond B has a 7% annual coupon.Both bonds have the same maturity,a face value of $1,000,an 8% yield to maturity,and are noncallable.Which of the following statements is CORRECT?

• A) Bond A's capital gains yield is greater than Bond B's capital gains yield.
• B) Bond A trades at a discount,whereas Bond B trades at a premium.
• C) If the yield to maturity for both bonds remains at 8%,Bond A's price one year from now will be higher than it is today,but Bond B's price one year from now will be lower than it is today.
• D) If the yield to maturity for both bonds immediately decreases to 6%,Bond A's bond will have a larger percentage increase in value.
• E) Bond A's current yield is greater than that of Bond B.

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Definitions:

Adaptive Defense Mechanism

A component of the immune system that evolves its response to specific pathogens through memory of previous encounters, enhancing protection upon subsequent exposures.

Stomach Acids

The digestive fluids secreted by the stomach's lining, containing hydrochloric acid and digestive enzymes, crucial for breaking down food.

Antibodies

Proteins produced by the immune system to neutralize or destroy toxins or disease-causing organisms.

Antibody Molecule

A protein produced by the immune system to identify and neutralize foreign objects like bacteria and viruses.