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

question 36

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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Definitions:

Reduction

A chemical reaction involving the gain of electrons or the decrease in oxidation state by a molecule, atom, or ion.

Oxidizing Agent

A substance that has the ability to oxidize other substances, meaning it gains electrons in the process.

Reagents

Substances or compounds that are added to a system in order to bring about a chemical reaction or to see if a reaction occurs.

NaOCl

Sodium hypochlorite, commonly known as bleach, a chemical widely used as a disinfectant and bleaching agent.