Which of the following statements is CORRECT? A. If a bond is selling at a disco

Question

Which of the following statements is CORRECT? A. If a bond is selling at a discount to par, its current yield will be greater than its yield to maturity. B. All else equal, bonds with longer maturities have less interest rate (price) risk than bonds with shorter maturities. C. If a bond is selling at its par value, its current yield equals its capital gains yield. D. If a bond is selling at a premium, its current yield will be less than its capital gains yield. E. All else equal, bonds with larger coupons have less interest rate (price) risk than bonds with smaller coupons. Which of the following statements is CORRECT? A. If a bond is selling at a discount to par, its current yield will be greater than its yield to maturity. B. All else equal, bonds with longer maturities have less interest rate (price) risk than bonds with shorter maturities. C. If a bond is selling at its par value, its current yield equals its capital gains yield. D. If a bond is selling at a premium, its current yield will be less than its capital gains yield. E. All else equal, bonds with larger coupons have less interest rate (price) risk than bonds with smaller coupons. A. If a bond is selling at a discount to par, its current yield will be greater than its yield to maturity. B. All else equal, bonds with longer maturities have less interest rate (price) risk than bonds with shorter maturities. C. If a bond is selling at its par value, its current yield equals its capital gains yield. D. If a bond is selling at a premium, its current yield will be less than its capital gains yield. E. All else equal, bonds with larger coupons have less interest rate (price) risk than bonds with smaller coupons. A. If a bond is selling at a discount to par, its current yield will be greater than its yield to maturity. B. All else equal, bonds with longer maturities have less interest rate (price) risk than bonds with shorter maturities. C. If a bond is selling at its par value, its current yield equals its capital gains yield. D. If a bond is selling at a premium, its current yield will be less than its capital gains yield. E. All else equal, bonds with larger coupons have less interest rate (price) risk than bonds with smaller coupons.

Explanation / Answer

Consider statement C.

If the bond is selling at par, it means that the face value is equal to the current market price of the bond. As a result, the FV is equal to the PV of the bond.

Since, the bond price is equal to the par value, then the current yield will be equal to the capital gains yield as the YTM will be equal to the coupon rate.

Hence, statement C is correct.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.