A Treasury Bond Has an 8% Annual Coupon and a 7.5

question 18

Multiple Choice

A Treasury bond has an 8% annual coupon and a 7.5% yield to maturity.Which of the following statements is CORRECT?

• A) The bond has a current yield greater than 8%.
• B) The bond sells at a discount.
• C) The bond's required rate of return is less than 7.5%.
• D) If the yield to maturity remains constant, the price of the bond will decline over time.
• E) The bond sells at a price below par.

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Definitions:

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate years.

Adjusting Entry

An accounting entry made into a ledger after the reporting period has ended, to record previously unrecorded revenues or expenses or to correct inaccurate entries.

Income Statement

An income statement is a financial document that shows a company’s revenues, expenses, and profits over a specific period, illustrating the profitability of the business.

Balance Sheet

A financial statement that provides a snapshot of a company's financial position, including assets, liabilities, and equity, at a specific point in time.