A Bond's Price and Its Yield to Maturity Are Inversely

question 22

Multiple Choice

A bond's price and its yield to maturity are inversely related because

• A)discounting future payments at a higher rate reduces the present value of the payments.
• B)discounting future payments at a higher rate increases the present value of the payments.
• C)an increase in the yield to maturity will lower a bond's coupon rate and hence its price.
• D)a fall in a bond's price will lower its par value and hence its yield to maturity.

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Definitions:

PTSD

Post-traumatic Stress Disorder, a mental health condition triggered by experiencing or witnessing a terrifying event, leading to long-term repercussions.

Obsessive-Compulsive Reaction

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Persistent, intrusive, and unwanted thoughts, images, or urges that cause distress or anxiety.