A 12-year bond has an annual coupon of 9%. The coupon rate will remain fixed unt
ID: 2683427 • Letter: A
Question
A 12-year bond has an annual coupon of 9%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 7%. Which of the following statements is CORRECT?Question options:
If market interest rates remain unchanged, the bond's price one year from now will be lower than it is today.
The bond is currently selling at a price below its par value.
If market interest rates remain unchanged, the bond's price one year from now will be higher than it is today.
The bond should currently be selling at its par value.
If market interest rates decline, the price of the bond will also decline.
Explanation / Answer
If market interest rates remain unchanged, the bond's price one year from now will be lower than it is today.
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