Bonds A, B, and C All Have a Maturity of 15

question 74

Multiple Choice

Bonds A, B, and C all have a maturity of 15 years and a yield to maturity of 9%. Bond A's price exceeds its par value, Bond B's price equals its par value, and Bond C's price is less than its par value. Which of the following statements is CORRECT?

• A) bond a has the most interest rate risk.
• B) if the yield to maturity on the three bonds remains constant, the prices of the three bonds will remain the same over the next year.
• C) if the yield to maturity on each bond increases to 8%, the prices of all three bonds will decline.
• D) bond c sells at a premium over its par value.
• E) if the yield to maturity on each bond decreases to 6%, bond a will have the largest percentage increase in its price.

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Definitions:

Subject Matter Jurisdiction

Legal authority granted to a court to hear and decide cases of a particular category or pertaining to a specific subject matter.

Jurisdiction

Jurisdiction refers to the official power or authority of a legal body to make decisions and judgments in certain geographical areas or over specific types of legal cases.

Parties

Individuals, groups, or entities that engage in a legal agreement or are involved in a lawsuit.

Long-Arm Statute

Legislation that allows for the service of process beyond a state's borders if a party has sufficient connection to the state bringing the suit.