Currently, bond G, a $1000 par value bond that matures exactly 10 years from tod

Question

Currently, bond G, a $1000 par value bond that matures exactly 10 years from today, sells for $1124.50.
If the yield to maturity for bond G is exactly the same one year from today as it is today, then
a. the price of bond G one year from today will be greater than $1124.50.
b. the price of bond G one year from today will be less than $1124.50.
c. the price of bond G one year from today will be equal to $1124.50.
d. the price of bond G one year from today will be $1000.
e. there is no way that the price of bond G one year from today can be determined because we do not
know the coupon rate for bond G.

Explanation / Answer

We know that there is inverse relation between Price and yield. If the current price of the stock is $1,124.50 and let us assume the current yield is 10%, then after one year, if the yield remains the same then the price also remains the same keeping the coupon payment constant.

Therefore, the correct option is c) The price of bond G one year from today will be equal to $1,124.50

Hence the correct option is c)

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