Bond a Has a 9% Annual Coupon While Bond B

question 72

Multiple Choice

Bond A has a 9% annual coupon while Bond B has a 6% annual coupon.Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant.Which of the following statements is CORRECT?

• A) The prices of both bonds will remain unchanged.
• B) The price of Bond A will decrease over time, but the price of Bond B will increase over time.
• C) The prices of both bonds will increase by 7% per year.
• D) The prices of both bonds will increase over time, but the price of Bond A will increase by more.
• E) The price of Bond B will decrease over time, but the price of Bond A will increase over time.

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