Bonds a and B Are 15-Year, $1,000 Face Value Bonds

question 30

Multiple Choice

Bonds A and B are 15-year, $1,000 face value bonds.Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon.Both bonds have a yield to maturity of 8%, which is expected to remain constant for the next 15 years.Which of the following statements is CORRECT?

• A) One year from now, Bond A's price will be higher than it is today.
• B) Bond A's current yield is greater than 8%.
• C) Bond A has a higher price than Bond B today, but one year from now the bonds will have the same price.
• D) Both bonds have the same price today, and the price of each bond is expected to remain constant until the bonds mature.
• E) Bond B has a higher price than Bond A today, but one year from now the bonds will have the same price.

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