Which of the Following Statements Is CORRECT

question 79

Multiple Choice

Which of the following statements is CORRECT?

• A) Assume that two bonds have equal maturities and are of equal risk,but one bond sells at par while the other sells at a premium above par.The premium bond must have a lower current yield and a higher capital gains yield than the par bond.
• B) A bond's current yield must always be either equal to its yield to maturity or between its yield to maturity and its coupon rate.
• C) If a bond sells at par,then its current yield will be less than its yield to maturity.
• D) If a bond sells for less than par,then its yield to maturity is less than its coupon rate.
• E) A discount bond's price declines each year until it matures,when its value equals its par value.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to a state of balance in the market.

Equilibrium Quantity

The amount of goods or services supplied that is exactly equal to the amount of goods or services demanded at a particular price level.

Demand

The total amount of a product or service that consumers are willing and able to purchase at various price levels at a given time.

Price Range

The spread between the highest and lowest prices of goods or services in the market.