Which of the following statements is CORRECT? a. All else equal, an increase in

Question

Which of the following statements is CORRECT?
a.

All else equal, an increase in interest rates will have a greater effect on higher-coupon bonds than it will have on lower-coupon bonds.
b.

If two bonds have the same maturity, the same yield to maturity, and the same level of risk, the bonds should sell for the same price regardless of the bond's coupon rates.
c.

All else equal, an increase in interest rates will have a greater effect on the prices of short-term than long-term bonds.

d.

If a bond's yield to maturity exceeds its coupon rate, the bond's price must be less than its maturity value.

e.

If a bond's yield to maturity exceeds its coupon rate, the bond's current yield must be less than its coupon rate.

Explanation / Answer

a. All else equal, an increase in interest rates will have a greater effect on higher-coupon bonds than it will have on lower-coupon bonds.

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