Consider each of the following bonds: Bond A: 8-year maturity with a 7% annual coupon.Bond B: 10-year maturity with a 9% annual coupon.Bond C: 12-year maturity with a zero coupon.? Each bond has a face value of $1,000 and a yield to maturity of 8%. Which of the following statements is NOT correct?
A. Bond A sells at a discount, while Bond B sells at a premium.
B. If the yield to maturity on each bond falls to 7%, Bond C will have the largest percentage increase in its price.
C. Bond C has the most reinvestment risk.
D. Bond C has the most price risk.
E. If the yield to maturity is constant, the price of Bond A will continue to increase over its life until it finally sells at par.
Answer: C
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