Question 2 1.5 pts Which of the following statements about bonds is/are correct?

Question

Question 2 1.5 pts Which of the following statements about bonds is/are correct? O a. Bond dealers sell bonds to investors at the bid price. O b. Premium bonds will generate capital losses if they are held till maturity. O c. The coupon rate of a bond fluctuates with the market condition over the life of a bond. O d. Short-term bonds that mature during the investment horizon tend to have greater price risk than long-term bonds that mature beyond the investment horizon. O e. All of the above statements are correct

Explanation / Answer

Correct option is > B. Premium bonds will generate capital losses if they are held till maturity

Reason: Premium bonds will eventually end up paying principal plus coupon value at end of maturity will be lower than premium. Bonds are pulled to par as maturity approaches.

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