Which of the following statements is CORRECT? a. All else equal, a bond that has

Question

Which of the following statements is CORRECT? a. All else equal, a bond that has a coupon rate of 10% will sell at a discount if the required return for bonds of similar risk is 8%. b. For a given firm, its debentures are likely to have a lower yield to maturity than its mortgage bonds. c. When large firms are in financial distress, they are almost always liquidated, whereas smaller firms are generally reorganized. d. The total return on a bond during a given year is based only on the coupon interest payments received. e. The price of a discount bond will increase over time, assuming that the bond's yield to maturity remains constant. Which of the following statements is CORRECT? a. All else equal, a bond that has a coupon rate of 10% will sell at a discount if the required return for bonds of similar risk is 8%. b. For a given firm, its debentures are likely to have a lower yield to maturity than its mortgage bonds. c. When large firms are in financial distress, they are almost always liquidated, whereas smaller firms are generally reorganized. d. The total return on a bond during a given year is based only on the coupon interest payments received. e. The price of a discount bond will increase over time, assuming that the bond's yield to maturity remains constant.

Explanation / Answer

The price of a discount bond will increase over time, assuming that the bond's yield to maturity remains constant.

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