a. If the Federal Reserve unexpectedly announces that is expects inflation to in

Question

a. If the Federal Reserve unexpectedly announces that is expects inflation to increase, then we would probably observe an immediate increase in bond prices. b. The total yield on a bond is derived from dividends plus changes in the price of the bond. c. Bonds are riskier than common stocks and therefore have higher required returns. d. Bonds issued by larger companies always have lower yields to maturity (less risk) than bonds issued by smaller companies. e. The market value of a bond will always approach its par value as its maturity date approaches, provided the bond

Explanation / Answer

e. The market value of a bond will always approach its par value as its maturity date approaches, provided the bond

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