If Current Interest Rates Are Lower Than the Coupon Rate

question 179

Multiple Choice

If current interest rates are lower than the coupon rate, investors owning a bond can:

• A)sell the bond at a premium, because lower interest rates will cause investors to bid price up to the point where their investment yields the market's return.
• B)only sell the bond at a discount (below face value), recognizing that the lower the price of the bond, the closer the yield becomes to the market's return.
• C)be wise to hold the bond until maturity, at which point the market value will greater than the face value of the bond.
• D)None of the above

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