A 15-Year Bond Has an Annual Coupon Rate of 8

question 20

Multiple Choice

A 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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