If an Investor Purchases a Bond When Its Current Yield

question 91

Multiple Choice

If an investor purchases a bond when its current yield is higher than the coupon rate,then the bond's price will be expected to:

• A) decline over time, reaching par value at maturity.
• B) increase over time, reaching par value at maturity.
• C) be less than the face value at maturity.
• D) exceed the face value at maturity.

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Definitions:

Distinctiveness

The quality of being easily distinguishable or unique from others, often used to describe characteristics that set individuals, groups, or objects apart.

Disposition

The inherent qualities of mind and character that influence an individual's behavior and attitudes.

Behaviour

The actions or reactions of an individual or group in response to external or internal stimuli.

Low Distinctiveness

A characteristic or situation that does not strongly stand out from others or is not easily differentiated.