Consider a Bond Portfolio Manager Who Expects Interest Rates to Decline

question 84

Multiple Choice

Consider a bond portfolio manager who expects interest rates to decline and has to choose between the following two bonds.
Bond A: 10 years to maturity,5% coupon,5% yield to maturity
Bond B: 10 years to maturity,3% coupon,4% yield to maturity

• A) Bond A because it has a higher coupon rate.
• B) Bond A because it has a higher yield to maturity.
• C) Bond B because it has a lower coupon rate.
• D) Bond A or Bond B because the maturities are the same.
• E) None of the above.

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Definitions:

Goods Delivery

The process of transporting goods from a seller to the purchasing customer or client.

Services Provided

The performance of work, assistance, or activities for the benefit of another individual or organization.

Expense Accounts

These accounts record the consumption of assets or services that occur during the operation of a business, leading to a decrease in owner's equity.

Revenue Accounts

Accounts in the general ledger that track the income generated by a company from its normal business operations.